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Summary COMPLETE A* AQA A LEVEL BUSINESS STUDIES REVISION NOTES

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Includes: - All Content (3.1 - 3.10), all points from specification & textbooks - All Formulas and Calculations - All Theories - Case Study Examples - A* Student Notes - Set out in easy lay out by each topic

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  • April 28, 2023
  • 136
  • 2022/2023
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COMPLETE A* AQA A LEVEL
BUSINESS STUDIES REVISION
NOTES

INCLUDES ALL CONTENT, THEORIES, CALCULATIONS & CASE
STUDY EXAMPLES

,3.1 What is Business?


What does a business do?
Production: the process whereby resources (factors of production) are converted into a product that is intended to
satisfy the requirements of potential customers.
Inputs : transformation : products

Inputs - factors of production:
Capital: goods that are made in order to produce other goals and services
Enterprise: the act of bringing the other factors of production together to create goods and services
Land: natural resources that can be used for production
Labour: workers


Primary: extraction of raw materials from the Earth e.g. farming, fishing and mining
Secondary: transforming or refining the raw materials e.g. manufacturing
Tertiary: service industry e.g. retail, banking, accounting, healthcare


Mission, Aims and Objectives:

Mission: An overall long term aim of a business to maximise profit
Mission statement: Outlines what the business in intending to do, a qualitative to key stakeholders
Business objectives: Specific intended outcomes of a business strategy and targets which a business sets to help
achieve its aims
Corporate Objectives: Goals of the whole business dictated by the mission

● Sales revenue
● Profit
● Return on investment (ROI)
● Growth
● Market share
● Cash flow
● Value of the business
● Corporate image and reputation

Functional objectives: Objectives of each department, these are specific to each department and will also help them
achieve their corporate objectives. EG: HR, Marketing, Finance




Hierarchy of Objectives:

Objectives are set at various levels in a business - from the top (corporate) and through the layers underneath
(functional and unit). You get a more coordinated and coherent workforce with a hierarchy of objectives as they
understand the long term aims. Objectives are useful in decision making and can be motivating for employees

● Managers can compare performance with their objectives to measure the success of the business and review
their decisions

, Objectives are often set in financial terms. That means that the objective is expressed in terms of a financial outcome
that is to be achieved. Those could include:
● Desired sales or profit levels Rates of growth
● Amount of cash generated
● Value of the business or dividends paid to shareholders




Business objectives should be “smart”:
Specific - Well defined, clear, and unambiguous
Measurable - With specific criteria that measure your progress toward the accomplishment of the goal
Achievable - Attainable and not impossible to achieve
Realistic/relevant - Within reach, realistic, and relevant to your life purpose
Time Bound - With a clearly defined timeline, including a starting date and a target date. The purpose is to create
urgency.




Common Business Objectives:


Profit:
● Important for Public Limited Companies as they need to appease the shareholders. The shareholders want to
make a profit as they want a heavy return on their investment (dividends). Source of finance and investment
● Good functional objectives to make profit. Profits can be reinvested- increase productivity more units
produced= sales, revenue growth and higher profits
● The most important objective


Growth:
● Small businesses aren’t focused on growth as they want to remain independent and keep control of the
business
● Larger businesses like PLC’s are more focused on growth, expansion- increasing market share, sales turnover,
investments




Survival:
● Small and new businesses are a focus as they have limited resources, don’t want to take risks as they might
fail (risk averse)
● External Environment – recession, survival becomes a clear objective

Functional objectives that will assist a business survival might include:
● Achieving minimum levels of sales and sales revenue to ensure costs are met and market share is retained




Diversification: Good way of spreading risk. EG: If a product collapses in demand
● Stops dependency on a single market
● Helps achieve growth and profit

, Market Standing:
● Innovative and most progressive organisation
● Link to your corporate image
● Achieve growth, sales, profit

Meeting the needs of other Stakeholders:
● Appease local communities
● Improves brand image and reputation.

Social and ethical objectives:
● Social objectives relate to benefitting society or people in need
● Ethical objectives are based on moral principles, environment and people
● Non-profit organisations are key focus for this
● Improves brand image, increases sales

Cash Flow:
● Is cash in coming in all the time which is vital
● Make sure you can pay out in any period of time



Corporate Objective Example Functional Objective

Increase Market Share Successfully launch five new products in existing markets
over the next two years (marketing)

Reduce Unit Costs Increase factory productivity by 10% within 2 years
(operations)

Increase Cash Flow Reduce the average time taken by customers to pay
invoices from 75 to 60 days (finance)

Improve Customer Satisfaction Achieve a 95% level high customer service (HR)


Measurement and importance of profit:
In most businesses profit is the reward that the owners of the business want to achieve from taking risks and making
investments.

Two ways of increasing profit:
● Increasing sales revenue
● Decreasing costs involved in making the product

Equations:
Profit = Total Revenue – Total Costs
Revenue = selling price per unit X quantity of units sold
Total variable costs = variable cost per unit X number of units sold

Fixed costs: costs that don’t change with the levels of output
Variable costs: costs that do change with the levels of output
Semi variable costs: combine elements of both fixed and variable costs e.g. a worker being paid a fixed salary plus a
bonus for each item produced

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