Week 8 · Chapter

Chapter 8 — Midterm Review & the Growth Question

Introduction to Business Free sample edition

The module's primary reading · ~35–45 minutes · Objective 1 (describe what a business is — profit, risk, and the not-for-profit contrast — its stakeholders, the factors of production, and the forces in its external environment, and explain how economic systems, supply and demand, market structures, and the economy's health indicators shape business decisions), Objective 2 (explain how entrepreneurs turn an idea into a funded small business — a business-plan outline in the SBA's traditional format, an industry analysis with the five competitive forces, and a start-up funding plan — and compare the forms of business ownership, franchising, and mergers for that venture), Objective 3 (evaluate business conduct with ethical reasoning and the corporate-social-responsibility frameworks, presenting the shareholder and stakeholder positions with their reasons and without a verdict, and distinguishing what is ethical from what is legal), Objective 4 (analyze how a firm creates value through operations, quality management, and information systems, and through marketing — target markets, the marketing mix, the product life cycle, pricing and break-even, distribution, and promotion), Objective 5 (apply the core organizational-structure concepts — the organization chart, line and staff, span of control, centralization, and tall vs. flat — and the four functions of management, the types of planning, the leadership styles, and the managerial skills to an organization at two sizes) · Read it early this week, before the review activities and well before the midterm.

In plain language

This week you look back at Weeks 1 to 7 and pull out the one tool or the one distinction each week asks for. Then you meet one new idea, organizational structure (how a business splits up its work and who reports to whom). You draw it as an organization chart (a diagram with a box for each job and a line to each person's boss) for the coffee cart at one cart and at two. The chart answers the question the second half of the course starts from: what changes when one cart becomes two?

Why you already care about this

Think about a place you have worked or volunteered. Maybe a sandwich shop, a summer camp, or a library's front desk. On your first day, someone told you whom to ask when something went wrong. That person was your boss, and the line between you was part of a chart, even if nobody ever drew it.

Now picture the coffee cart from this course. For seven weeks it has been small: an owner and one part-time helper. The cart sells drinks at 5 dollars, breaks even at 12,000 drinks a year, and can make at most 30 drinks an hour. Every one of those numbers still holds. But the owner is thinking about a second cart, and a second cart needs people who are not in the room with the owner. Who runs it? Who decides what to order? Whom does a new barista ask when the espresso machine jams?

This chapter does two jobs. It walks back through Weeks 1 to 7, one tool or one distinction per week, so you can see the whole first half on one page. Then it adds the one new tool, the organization chart, and uses it to answer the growth question.

By the end of this chapter you will be able to:

rerun the one calculation or the one sort each of Weeks 1 to 7 asks for, with every step shown, and say what it means for the business;
name the classic wrong turn for each earlier week and fix it;
draw the coffee cart's organization chart at one cart and at two, and count its people, levels, and spans of control;
tell a line position from a staff position;
explain the trade-offs between centralization and decentralization, and between a tall structure and a flat one.

Carry this line with you: one tool per week; one new chart for growing.

Where we are

Already covered: Week 1 introduced the cart and its SWOT; Week 2 placed it in a market; Week 3 wrote its plan and funding plan; Week 4 chose its legal form; Week 5 asked what a business owes; Week 6 found its bottleneck; Week 7 priced its drinks and found its break-even.
This week: a review of Weeks 1 to 7, one tool or one distinction per week, plus one new tool, the organization chart, drawn at one cart and at two; and the midterm.
How they connect: every earlier number stays true when the cart grows, and the chart shows the one thing those numbers leave out: who does the work and who decides.
Where we're going next: Week 9, Reaching More Customers: Distribution, Promotion & Digital Commerce, opens the second half of the course, which follows the growing cart to more buyers and then to the people growth requires.

Seven weeks built one business. Week 1 gave you the business itself; Weeks 2 and 3 gave you its market and its plan; Weeks 4 and 5 gave you its legal form and its duties; Weeks 6 and 7 gave you how it makes its product and what it charges. Every value below comes from illustrative datasets constructed for this course, not real data, and you have met each one before.

1. Separate revenue from profit, and inside from outside

Picture an illustrative campus bookstore in the first week of classes. The line runs out the door, the registers never stop, and the store takes in more money that week than in any other. Is it a great week for profit? Not necessarily. Much of that money goes straight back out to pay for the books, the extra cashiers, and the shipping.

That gap is Week 1's one distinction. Revenue is the money that comes in from selling goods or services, before anything is paid out. Profit is what is left when expenses are subtracted from revenue; when expenses are larger than revenue, the difference is a loss instead. A busy register shows revenue. It does not show profit until the expenses are counted.

Week 1's one tool was the SWOT, a planning tool that sorts a situation into strengths and weaknesses, which sit inside the organization, and opportunities and threats, which sit outside it. You sort each entry with two questions: is it inside the cart or outside it, and does it help or hurt?

Worked example — re-sorting the cart's SWOT. The cart and its SWOT are illustrative.

Strengths (inside, helps): low fixed costs; it can move to where the customers are.
Weaknesses (inside, hurts): one espresso machine; one person at the counter.
Opportunities (outside, helps): an office building opening two blocks away; a weekend farmers' market looking for vendors.
Threats (outside, hurts): a chain café opening nearby; rising bean prices.
The tally: 2 strengths + 2 weaknesses = 4 inside entries, and 2 opportunities + 2 threats = 4 outside entries.

In words: the cart's flexibility helps it and its single machine and single worker limit it, while the neighborhood brings two chances and two dangers the cart does not control.

Misconception check. Students often file the new office building as a strength, because it is good news. That is tempting, since strengths and opportunities both help. But the cart does not own or control the building, so it sits outside the cart: it is an opportunity. The cure is to ask "inside or outside?" before you ask "helps or hurts?" The same habit catches the other Week 1 slip, reading a busy day's revenue as profit.

Memory hook: in or out first; good or bad second.

2. Read the schedule and place the cart in its market

Picture an illustrative farmers' market at opening time. Strawberry sellers have set their prices, and buyers are deciding how many pints to take home. Week 2 turned that scene into a schedule you can read, a classroom model of buyers and sellers.

At 2, 3, 4, 5, 6, and 7 dollars a pint, buyers want 700, 600, 500, 400, 300, and 200 pints, and sellers offer 100, 200, 300, 400, 500, and 600 pints. Equilibrium is the price at which the amount buyers want to purchase matches the amount sellers want to sell.

Worked example — the schedule's equilibrium and shortage. The schedule is illustrative.

Equilibrium: at 5 dollars, buyers want 400 pints and sellers offer 400 pints, so the market settles at 5 dollars and 400 pints.
Below equilibrium: at 4 dollars, buyers want 500 pints and sellers offer 300 pints, so the shortage is 500 − 300 = 200 pints.
A shift of demand: a summer festival adds 200 pints of demand at every price, and the new equilibrium is 6 dollars and 500 pints.

In words: when the price sits below 5 dollars, buyers want more than sellers offer and the price tends to rise; when the festival adds buyers at every price, both the price and the amount sold go up.

Week 2's one placement put the coffee cart in monopolistic competition, a market structure with many sellers of slightly different products and easy entry for new sellers. Many places sell coffee, each cart's drink is a little different, and a new seller can set up nearby. That is why the cart has to give buyers a reason to choose it.

Misconception check. Students often read a shortage as "the sellers ran out." That is tempting, because empty tables look like running out. But a shortage is a gap that opens when the price sits below equilibrium; at 4 dollars, sellers still bring 300 pints. The cure is to compare the price with the equilibrium price first. A second slip is reading monopolistic competition as a kind of monopoly; it has many sellers, not one.

Memory hook: below the match, a shortage; above it, a surplus.

3. Check the plan: the funding plan and the five forces

Picture the cart's owner at a kitchen table before opening day, with two lists side by side. One list says what the cart needs. The other says where the money comes from. Week 3's one calculation is the check that the two lists match.

Worked example — the start-up list meets the funding plan. The figures are illustrative, in dollars.

Start-up needs: cart and equipment 20,000 + opening inventory 2,000 + cash cushion 8,000 = 30,000 dollars.
Funding plan: owner's money 20,000 + equipment loan 10,000 = 30,000 dollars.
The check: 30,000 = 30,000, so every dollar the cart needs has a source.
Interest: the loan costs 10 percent a year, so the first year's interest is 10,000 × 0.10 = 1,000 dollars.

In words: the cart needs 30,000 dollars before it sells a single drink, and the 1,000 dollars of interest is a cost the plan carries whether or not the cart earns a profit.

Week 3's one framework read the cart's industry for the plan's market analysis. The five forces are a classroom model from Porter (1979), "How Competitive Forces Shape Strategy", that reads an industry's competition through five forces: the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services, and rivalry among existing competitors. For the cart, the chain café opening nearby is rivalry and a possible new entrant, the bean supplier holds supplier power, customers who can walk to another cart hold buyer power, and bottled cold brew in a grocery store is a substitute.

Misconception check. Students often think the five forces are five competitors. That is tempting, because the word "competitive" is in the title. But a supplier and a substitute product are forces too, and neither one is a rival seller. The cure is to name the force before you name the business behind it. A related slip reads the plan's funding request as a promise of profit; it says where the money comes from, not that the cart will earn it back.

Memory hook: needs equal sources; forces are not rivals.

4. Compare the forms: who is on the hook for the loan

Picture the worst case: the cart fails, and nothing from the failed cart goes toward the 10,000-dollar equipment loan. Who pays? Week 4's one distinction is that the answer depends on the legal form.

Recall the terms. Unlimited liability is an owner's duty to pay the business's debts out of personal assets, such as savings or a car, with no cap on the amount. Personal exposure is the most an owner could lose personally if a business fails: the money the owner put in plus any business debt the owner must repay from personal assets.

Worked example — the cart's exposure under two forms. The comparison is illustrative, in dollars.

Sole proprietorship: the owner loses the 20,000 put in and still owes the 10,000 loan personally, so personal exposure = 20,000 + 10,000 = 30,000 dollars.
Single-member LLC: the loan is the LLC's debt, so the owner can lose the 20,000 put in but not the loan; personal exposure = 20,000 dollars.
The shield: 30,000 − 20,000 = 10,000 dollars of personal exposure removed, the amount of the loan.

In words: as a sole proprietor the owner could lose 30,000 dollars; as a single-member LLC the owner could lose 20,000. That gap is why the case chose the LLC, an illustrative choice and not advice for any real business.

Misconception check. Students often think limited liability means the owner cannot lose money. That is tempting, because "limited" sounds like "safe." But the LLC's owner can still lose the whole 20,000 put in; the shield only protects personal assets beyond it. Two more Week 4 slips belong here: a sole proprietor is not shielded because the business has its own name, and an LLC is a form state law creates, not a kind of corporation.

Memory hook: the shield guards the house, not the stake.

5. Weigh ethics against legality, and the two positions

Picture an illustrative bike shop that learns a brake part it has sold for years wears out early. In the case, no rule requires it to warn past buyers. Is staying quiet legal? Yes, in the case. Is it right? That is a different question, and Week 5 kept the two apart.

Business ethics is the standards of right and wrong that guide the choices people make in a business, including choices the law leaves open. Legality is whether the law allows an act; the law sets a minimum that conduct must not fall below, so a legal act can still be unethical.

Week 5's case was an illustrative appliance-parts plant in a small town that weighs automating one line.

Worked example — counting the plant's positions. The case is illustrative.

Before: 120 employees.
Automation: one line is automated, eliminating 40 positions.
Retraining: 15 of those workers are retrained for maintenance roles.
Net change: 40 − 15 = 25 positions.
After: 120 − 25 = 95 employees.

In words: the plant ends with 25 fewer positions, 95 employees instead of 120. Both sides of the argument accept that count. What they disagree about is whether the change is right.

The two positions stay at full strength, with no verdict. The shareholder position, argued by Friedman (1970) in "The Social Responsibility of Business Is to Increase Its Profits", holds that within the law and ethical custom a corporate executive's duty runs to the owners who employ them. The stakeholder position, set out by Freeman (1984) in Strategic Management: A Stakeholder Approach, holds that a firm is managed for everyone who can affect it or is affected by it. A shareholder reading weighs the lower costs and steadier quality; a stakeholder reading also weighs the 25 positions and the town's smaller payroll.

Misconception check. Students often think "ethical means legal." That is tempting, because laws often write down what people agree is wrong. But the bike shop's silence was legal in the case and still raised an ethical question. The cure is to run two separate tests: is it legal, and is it right? A second slip reads Friedman's position as "anything goes"; his essay keeps the law and ethical custom as limits.

Memory hook: legal is the floor; ethics asks about the room.

6. Find the bottleneck before you count capacity

Picture the cart at 8 in the morning with a line of office workers. The counter step is quick. The espresso machine is not. Week 6's one calculation is the one that tells you how many drinks the cart can really make.

Recall the terms. A bottleneck is the slowest step in a process, the one that limits how much the whole process can produce. Capacity is the most output a process can produce in a given time, set by its slowest step.

Worked example — the cart's capacity. The process map is illustrative.

Counter: taking the order and payment takes 1 minute per drink.
Preparation: making a drink takes 2 minutes on the one espresso machine, so the machine is the bottleneck.
Capacity with one machine: 60 ÷ 2 = 30 drinks an hour.
The morning rush: 30 × 4 = 120 drinks in a four-hour rush.
With a second machine and a second person: preparation runs at an effective 1 minute, so the counter caps capacity at 60 ÷ 1 = 60 drinks an hour.

In words: with one machine the cart can make at most 30 drinks an hour however fast the counter works; a second machine and a second person double that to 60, and the counter becomes the new limit.

An illustrative hospital kitchen that sends meal trays up to its wards shows the same rule. If plating takes longer than cooking, the plating station sets how many trays leave each hour, and a faster stove changes nothing.

Misconception check. Students often think capacity is set by the fastest step. That is tempting, because the fast step feels like the cart's real speed. But every drink waits its turn at the machine, so the slowest step sets the pace. The cure is to find the bottleneck first and divide 60 by its minutes.

Memory hook: the slowest step sets the speed.

7. Divide by what each sale leaves over

Picture the menu board: 5 dollars a drink. It is tempting to divide the cart's yearly costs by that price and call it a day. Week 7 showed why that gives the wrong count.

Recall the terms. The per-unit margin is the price of one unit minus its variable cost: the dollars each sale contributes toward covering fixed costs. The break-even point is the number of units a business must sell to cover all its costs, found as fixed costs divided by the price minus the variable cost per unit.

break-even units = fixed costs ÷ (price − variable cost per unit)

Worked example — the cart's break-even, markup, and margin. The figures are illustrative; money is in dollars and volume in drinks a year.

Per-unit margin: 5 − 2 = 3 dollars a drink.
Break-even: 36,000 ÷ (5 − 2) = 36,000 ÷ 3 = 12,000 drinks a year.
Per day: 12,000 ÷ 250 = 48 drinks a day over 250 operating days.
Markup on cost: 3 ÷ 2 × 100 = 150 percent.
Margin on price: 3 ÷ 5 × 100 = 60 percent.

In words: the cart has to sell 12,000 drinks a year, about 48 a day, before it earns a single dollar of profit, and the same 3-dollar gap is a 150 percent markup on cost and a 60 percent margin on price.

Check that against Week 6. The cart can make 30 drinks an hour, so 48 drinks fits inside two hours of full-speed work. The owner's problem is finding 48 buyers a day, not making the drinks.

Caveat: a break-even assumes one price and a constant variable cost per unit. It is a model, and the owner reruns it whenever a price or a cost changes.

Misconception check. Students often compute the break-even as fixed costs divided by the price: 36,000 ÷ 5 = 7,200 drinks. That is tempting, because the price is the number on the board. But 2 of every 5 dollars pay for the cup and its contents, so only 3 dollars of each sale covers fixed costs. The cure is to divide by the per-unit margin. A second slip reads markup and margin as the same percentage; they divide the same gap by different amounts.

Memory hook: divide by what each sale leaves over.

8. Draw the chart: one cart becomes two

Picture the owner on the first morning with two carts. One cart is parked at the office building and the other at the farmers' market, across town. The owner can stand at only one of them. Someone at the other cart has to make decisions, train the barista, and call when the machine jams. That is the growth question, and it needs a new tool.

Organizational structure is the way a business divides its work into positions and links those positions through reporting relationships, so each person knows who does what and who answers to whom.

An organization chart is a diagram of an organization's structure that shows each position as a box and draws a line from each position to the manager it reports to directly.

A level is one row of an organization chart; everyone on a level sits the same number of reporting steps below the top. One more idea lets you read a chart quickly.

Span of control is the number of people who report directly to one manager.

Worked example — the cart's chart at two sizes. The charts are illustrative.

One cart: the owner is over one part-time helper. That is 1 + 1 = 2 people on 2 levels, and the owner's span of control is 1.
Two carts: the owner is over two cart leads, and each cart lead is over two part-time baristas. That is 1 + 2 + 2 × 2 = 7 people on 3 levels.
Spans at two carts: the owner's span is 2 (the two cart leads), and each cart lead's span is 2 (two baristas), a span of 2 at each level.
Who manages: 1 owner + 2 cart leads = 3 people manage others, and 7 − 3 = 4 baristas manage no one.

In words: growing from one cart to two takes the business from 2 people on 2 levels to 7 people on 3 levels, and every manager on the bigger chart has 2 direct reports.

The table below describes the two charts in words, level by level.

The coffee cart's organization chart at one cart and at two carts, by level (illustrative)
Level	One cart	Two carts
Top	the owner	the owner
Second	one part-time helper	two cart leads, each reporting to the owner
Third	none	four part-time baristas, two reporting to each cart lead
People in all	2	7

A chart also sorts positions by the kind of work they do. A line position is a position that does an organization's core work, or directly manages it, and carries direct authority over that work. A staff position is a position that advises and supports the people in line positions with specialized help, without direct authority over the core work.

Every position on the cart's chart is a line position, because each one makes and sells drinks or directly manages the people who do. An illustrative hospital kitchen shows the contrast. The cooks who prepare meals for the wards hold line positions. A dietitian who advises the cooks on what each person on the wards may eat holds a staff position: the advice matters, but the dietitian does not run the stove or direct the cooks' shifts.

Pause and try this. Choose one: (a) sketch the chart of a place you have worked or volunteered, and count its levels and your manager's span of control; or (b) explain in two sentences why a cart lead at the second cart holds a line position and not a staff position.

Misconception check. Students often read span of control as the size of the whole company. That is tempting, because a bigger business sounds like a bigger span. But at two carts the business has 7 people while the owner's span is 2, because only the two cart leads report to the owner directly. The cure is to count only the lines that run straight into one manager's box. A second slip reads "staff position" as "the staff," meaning every employee; a staff position is a specific kind of advising job.

Memory hook: count the lines into one box, not the boxes on the page.

9. Decide where decisions sit and how tall the chart is

Picture an illustrative city transit agency. If every route change, every bus schedule, and every driver's shift swap had to wait for the director, nothing would move. If every driver decided routes alone, riders could not plan a trip. Somewhere between those two extremes sits the real answer, and every organization has to choose where.

Centralization is an arrangement that keeps most important decisions with the top managers of an organization.

Decentralization is an arrangement that hands decision-making authority down to managers and employees closer to the work.

The two-cart chart forces the same choice. Some decisions are better kept at the top. The 5-dollar price, for example, is the number the 12,000-drink break-even rests on, so changing it at one cart alone would change the cart's whole break-even. Other decisions sit better closer to the work. A cart lead who knows when the farmers' market is busiest could set that cart's morning schedule. Deciding which decisions go where is a judgment about speed, consistency, and trust, and the chart does not make it for the owner.

Charts also differ in shape. A tall structure is an organizational structure with many levels of management, in which each manager has a narrow span of control. A flat structure is an organizational structure with few levels of management, in which each manager has a wide span of control.

Worked example — a taller chart versus a flatter one. Both charts are illustrative and hold the same 7 people.

The taller choice: the two-cart chart above has 3 levels, with a span of control of 2 at each level.
A flat choice: drop the cart-lead level, so the owner is directly over all 7 − 1 = 6 others, on 2 levels, with a span of control of 6.
The trade-off: the taller chart gives each barista a nearby manager but adds a level that decisions pass through; the flat chart is quicker from top to bottom but asks one owner to guide 6 people at two places at once.

In words: the same 7 people can sit on 3 levels with spans of 2 or on 2 levels with a span of 6, and choosing between them is a judgment about how much one manager can guide well.

An illustrative community food bank shows that flat does not mean leaderless. Its volunteer coordinator might be the only manager, with every volunteer reporting directly to the coordinator. That is a flat structure, and it still has a manager making decisions.

Pause and try this. Choose one: (a) name one decision at the two-cart business you would keep with the owner and one you would hand to a cart lead, with a reason for each; or (b) say whether you would rather work under the taller chart or the flat one, and why.

Misconception check. Students often think a flat structure has no managers, or that decentralization means no one is in charge. Both are tempting, because "flat" and "handing down" sound like removing the boss. But the food bank's coordinator still manages, and a decentralized cart lead still answers to the owner. The cure is to ask who decides each thing, not whether anyone decides.

Limitation: an organization chart shows who reports to whom, not how well people work together. Two businesses with the same chart can run very differently.

The midterm checks Objectives 1 to 3 and the operations and pricing parts of Objective 4, as taught in Weeks 1 to 7. As the syllabus states, AI is not permitted on the midterm; it confirms that you personally can name a concept, read a schedule, and compute the course's few formulas.

Memory hook: flat is not leaderless; handed down is not let go.

Key terms

organizational structure — The way a business divides its work into positions and links those positions through reporting relationships, so each person knows who does what and who answers to whom. (first used: 8. Draw the chart: one cart becomes two)
organization chart — A diagram of an organization's structure that shows each position as a box and draws a line from each position to the manager it reports to directly. (first used: 8. Draw the chart: one cart becomes two)
level — One row of an organization chart; everyone on a level sits the same number of reporting steps below the top. (first used: 8. Draw the chart: one cart becomes two)
span of control — The number of people who report directly to one manager. (first used: 8. Draw the chart: one cart becomes two)
line position — A position that does an organization's core work, or directly manages it, and carries direct authority over that work. (first used: 8. Draw the chart: one cart becomes two)
staff position — A position that advises and supports the people in line positions with specialized help, without direct authority over the core work. (first used: 8. Draw the chart: one cart becomes two)
centralization — An arrangement that keeps most important decisions with the top managers of an organization. (first used: 9. Decide where decisions sit and how tall the chart is)
decentralization — An arrangement that hands decision-making authority down to managers and employees closer to the work. (first used: 9. Decide where decisions sit and how tall the chart is)
tall structure — An organizational structure with many levels of management, in which each manager has a narrow span of control. (first used: 9. Decide where decisions sit and how tall the chart is)
flat structure — An organizational structure with few levels of management, in which each manager has a wide span of control. (first used: 9. Decide where decisions sit and how tall the chart is)

Summary

Week 1: revenue is not profit; sort a SWOT by inside or outside first.
Week 2: the strawberry market settles at 5 dollars and 400 pints; a shortage means the price is below equilibrium.
Week 3: start-up needs of 30,000 dollars match the funding plan; the five forces are not five rivals.
Week 4: the LLC cuts the owner's exposure from 30,000 to 20,000 dollars, not to zero.
Week 5: legal is not the same as ethical; the plant's net change is 25 positions.
Week 6: the slowest step sets capacity, 30 drinks an hour with one machine.
Week 7: the break-even is 12,000 drinks; the markup is 150 percent and the margin 60 percent.
New: at two carts the chart holds 7 people on 3 levels, with a span of control of 2 at each level.
New: centralization keeps decisions at the top; a flat chart still has managers.

Check your understanding

Work these before looking at the answers — they are ungraded, and the answers (with reasoning) are at the bottom of the page.

An illustrative town library has a director over three branch heads, and each branch head is over four library pages. How many people are on the chart, and on how many levels? What is the director's span of control, and each branch head's? If the library dropped the branch-head level, what would the director's span become?
An illustrative juice stand at a gym sells smoothies at 10 dollars. Each smoothie costs 2 dollars in fruit and cups, and the stand's fixed costs are 26,000 dollars a year. Find the break-even in smoothies, the markup on cost, and the margin on price. A friend divides 26,000 by 10 and gets 2,600; explain what went wrong.
An illustrative ride-share driver is thinking about a weekend airport-shuttle side business. Sort each fact into the SWOT: (a) the driver already owns a reliable van; (b) a new hotel is opening near the airport; (c) the driver has never kept business records; (d) a city rule on shuttle permits may tighten.
An illustrative regional bakery with four shops lets each shop manager choose the daily specials, but the owner sets every price. Is the bakery centralized, decentralized, or a mix? Give one reason the owner might keep prices at the top.

Answers (worked reasoning — read after attempting)

Count by level: 1 director + 3 branch heads + 3 × 4 = 12 pages, so 1 + 3 + 12 = 16 people on 3 levels. The director's span of control is 3, because only the three branch heads report to the director directly; each branch head's span is 4. Without the branch-head level, the director would be over all 16 − 1 = 15 others, a span of 15 on 2 levels. The library has 16 people, but no one's span is 16, which is the trap the item was built to catch.
Per-unit margin: 10 − 2 = 8 dollars a smoothie. Break-even: 26,000 ÷ (10 − 2) = 26,000 ÷ 8 = 3,250 smoothies a year. Markup on cost: 8 ÷ 2 × 100 = 400 percent. Margin on price: 8 ÷ 10 × 100 = 80 percent. The friend divided by the price, but 2 of every 10 dollars pays for fruit and cups, so only 8 dollars of each sale covers fixed costs; at 2,600 smoothies the stand would still be losing money.
(a) The van is inside the business and helps it, so it is a strength. (b) The hotel is outside the business and could help, so it is an opportunity, even though it is good news. (c) Missing records are inside and hurt, so it is a weakness. (d) A tighter permit rule is outside and could hurt, so it is a threat.
It is a mix. Choosing specials is decentralized, because shop managers closer to the work decide it; setting prices is centralized, because the owner keeps it. One reason to keep prices at the top: every shop's break-even rests on its prices, so one owner setting them keeps the whole bakery's numbers consistent.

Next up in this module: the lecture, the slide deck, the Readings & Resources page, the practice set, the discussion, and the midterm — and next week the growing cart reaches more customers, where the marketing mix's place and promotion become a full distribution and promotion model.

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