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Summary AQA A LEVEL BUSINESS REVISION NOTES
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ALL THE NOTES YOU NEED FOR AQA A LEVEL BUSINESS. INCLUDES NOTES FROM ALL 10 TOPICS IN DETAIL COVERING EVERY SINGLE PART OF THE SPECIFICATION
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Kalen Harrald – Business RevisionAQA
A Level
Business
Revision
Notes
1
, Kalen Harrald – Business Revision
Context –
Chapter 1 – What is a business? – Chapter 7 – Analysing the Strategic Position of Business –
- Understanding the nature and purpose of business - Mission, corporate objectives and strategy
- Understanding business forms. - Analysing the existing internal position of a business to
- External Factors affecting a business. assess strength and weaknesses – financial ratio
Chapter 2 - Managers, leadership and decision making – analysis
- Understanding management, leadership and decision - Analysing the existing internal position of a business to
making assess strength and weaknesses – overall performance
- Understanding management decision making - Analysing external environment to assess opportunities
- Understanding role and importance of stakeholders and threats – political and legal change
- Analysing external environment to assess opportunities
Chapter 3 – Decision making to improve marketing
and threats – social and technological
performance –
- Analysing external environment to assess opportunities
- Setting marketing objectives
and threats – the competitive environment
- Understanding markets and customers
- Analysing strategic options – investment appraisal
- Making marketing decisions – segmentation, targeting,
Chapter 8 – Choosing Strategic Direction
and positioning
- Making marketing decisions – using the marketing mix - Strategic Direction – choosing which markets to
compete in and what products to offer
Chapter 4 – Decision making to improve operational
- Strategic positioning – choosing how to compete
performance –
Chapter 9 – Strategic Methods – how to pursue strategies
- Setting operational objectives
- Analysing operational performance - Assessing a change in scale
- Making operational decisions – increasing efficiency and - Assessing Innovation
productivity - Assessing internationalization
- Making operational decisions – improving quality - Assessing greater use of digital technology
- Making operational decisions – managing inventory and Chapter 10 – Managing Strategic Change –
supply chains - Managing Change
Chapter 5 – Decision making to improve financial - Managing Organizational Culture
performance – - Managing strategic implementation
- Setting financial objectives - Problems with strategy and why strategies fail
- Analysing financial performance
- Making financial decisions – sources of finance
- Making financial decisions – improving cash flow and
profits
Chapter 6 – Decision making to improve Human
Resources (HR) –
- Setting human resource objectives
- Analysing human resource performance
- Making HR decisions – improving organizational design
and managing HR flow
- Making HR decisions – improving motivation and
engagement
- Making HR decisions – improving employer-employee
relations
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, Kalen Harrald – Business Revision
1 – What is a business? –
1.1 – Understanding the nature and purpose of business –
Business Functions – Objectives – SMART (Specific, measurable, achievable, relevant, time)
Marketing – advices business on consumer trends, attitudes and purchasing Set as the boss cannot make every decision. You give it to more junior staff to
habits of customers. – how to promote and advertise. make middle ranking decisions. Managers feel clear and confident making
HR – manages staff, plan for and deal with recruitment, training, incentives, decisions that contribute to goals. Motivating to have clear goals to aim
and equal opportunities. towards.
Finance – helps to identify what can be afforded, and set budgets. Objectives are on a basis for devising strategy.
Operations – manage supply chain. Buy materials, manufacture them, and Common Business Objectives –
deliver to customer (flow of work) Profit Optimisation – long term health. Provides capital to fund growth, as
Why businesses exist? – well as providing safety blanket that allows risks to be taken.
- Human spirit and sense of adventure Profit Maximization –to make as much profit as possible
- Create family income Growth – focus on rising customer numbers.
- Lure of being your own boss (power) Cash flow – ensure the flow of profit is positive
- World needs more than, buyer, seller and market to meet Survival – keeping the cash flow at a good pace.
Fixed costs – any costs that do not affect output. Payments used for time than Social and ethical – only means something if business is willing to sacrifice
activity. Rent is example. some profit or market share.
Variable costs – costs which affect output. Payments for use of inputs. Growth + Profit, Survival + cash flow, survival v growth, social v profit.
Costs of production – critical element of information to manage business, importance of profit –
managers need to be aware of costs to assess whether decision is profitable. Profit is measured by deducting all business costs from revenue.
Total costs = fixed costs + variable costs Provides a measure of success – directors keep some profits, avoids needs to
Profits – revenue is greater then costs = revenue – costs pay interest on loans. Returned profit – main source of capital
Revenue – volume of goods x average selling price. To increase – sell goods at Reward – take risk so entitled to profits. Every 6 months pay dividends, or
higher price or charge at lower price and sell as much as possible. retain profit, invest it and make even more profit.
Missions – aim for business is settled upon the boss Motivator – sole entitled to all profits – incentives for employees
Aim – general statement where the business is heading Attractive to stakeholders – easier to establish links – profitable – more
Mission statement – brief statement of the purpose of a company – guides consumers.
actions, sets out goals, provides direction, and guides decision. Measure of success – compare to competitors to see how well they are doing
Guide for future investment – guides to markets where can make profit.
1.2 - Different business forms –
Unlimited Liability – finances of the business are treated with the finances of Sole traders – Individual who owns and operates own business. They make
the business owner. House and assets could be taken away if debts are owed. the final decision about the running of the business (one who benefits
Limited liability – legal duty to pay any debts caused by a business stays with financially from the profits). The owner has unlimited liability for any debt. If
the business itself and not the owners. If the company has any debts, then the sole trader cannot pay their bills, the courts can allow personal assets to be
courts can force the business to sell its assets. To gain this benefit – business seized by creditors to pay outstanding debts. If insufficient funds can be
must go through the legal process to become a company – incorporation. Law raised, the person is declared bankrupt. Little finance is required to set up and
- owners of the business and the company itself are n ow two different things. run the business. No formal rules. All they must do is declare their self-assess.
Incorporation – Must be send (Memorandum of Association - name and Partnerships – two or more people start a business without forming a
office, Articles of association – company rules, Form 10 – details of directors, company. Have unlimited liability. Both people need to trust each other.
and Form 12 – declaring company complies with company law) all to Registrar Public Limited Companies - Share capital of more than £50,000. There it can
of Companies. float on the stock market, which allows any member of the public to buy
Private Limited Companies - Startup capital often be £100. The shares of a shares. This increases the company’s access to share capital. The term plc will
private limited company cannot be bought and sold without the agreement of appear after the company name.
other directors. This means the company cannot be listed on the stock Advantages – shares sold to public via stock exchange, more capital to invest
market. The form of business is often run by a family or small group of friends. and grow.
They must state Ltd after the company name. Have limited liability too. Disadvantages – higher costs, risk of hostile takeovers, open to more public
Advantages – limited liability, separate legal identity, more flexible scrutiny.
than public, financial records remain private. Differences between public and private limited companies - A public
Disadvantages – more complex to set up (increase legal company can raise capital from the general public – private cannot
requirements), loss of control – shareholders vote, cannot sell Minimum capital requirement of public is £50,000 – private there is not.
shares on stock market. Public companies must publish are more detailed accounts then private.
Converting – it can be difficult. Occurs when private limited company expands Not-for-profit organizations – Mutual Businesses – no shareholders and no
to the point of having share capital – more than £50,000. owners. Exist for interest of customers. Mutual societies did not survive 2008
credit crunch without being bailed out. No shareholders pressuring it for
Co-operatives – This can be worker owned – potential to offer a more united profits.
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, Kalen Harrald – Business Revision
cause for the workforce than the profit of shareholders. Enjoy bonuses of 20% Charities – pressure groups are examples. Ensures that those who fund the
of salary, as their share of company’s profits. – ethical trading. charity are not liable for any debts, but have significant tax benefits.
Public Sector Organizations – owned by the state. Issues in understanding forms of business – Role of shareholders – own a
Corporations – government owned that trade with private sector. Most have share of the business, proportionate to their shareholding. Provide capital to
been sold to private sector forming a private monopoly. get business going and to keep it growing. Should be proactive, raising
Local Authority Services – all used to run care homes – spending cuts stop. important issues with board of directors – many do not. Public limited
Private-public partnerships – government have promoted idea that public company must invite all shareholders to annual meeting – right to question
services would be more efficient if run in partnership with private sector. Led the board.
to private finance initiative – finance was used to initiate public sector Shareholder rewards – annual dividend payments (decided by company
investments. directors when they know final figure for profit. Dividends received are in
proportion to shareholdings), rise in value of shares.
What influences the price of shares? – Nobody knows what a share is going Significance of share price changes – Short term – no actual impact on a
to be worth in future. Value investors place on share depends on profit after business change in its share price. Share capital of business was invested
tax x value investors place on earnings. permanently by shareholders. Lose confidence – find another buyer – cannot
demand money back from company. Longer term – share price is higher,
makes relatively cheap to get more share capital. Low, remains low – unlikely
Issues with different forms of business –
to raise any extra share capital – harder to raise loan capital.
Unlimited and Limited Liability – If business sells faulty item, customer can
sue business but not owner, important if business goes into liquidation.
‘Pre pack administration’ – allows business’s owners to write off debts to Effect of ownership on mission, objectives, decisions and performance –
creditors, yet remain in control of business – suppliers lose everything. Most large companies are plcs so have large number of outside shareholders
Ordinary share capital – money given to company’s share holders in return who care little about business. Short term thinking is the curse of a company
for a share certificate. Private and public. Expect an annual dividend as reward e.g. Marks and Spencer – plenty of time to come up with trading strategy as
for investment, but lousy trading can drop dividend. report profits ever 6 months.
Market Capitalization – total value of issued ordinary shares of public Fundamental problem – whatever the mission statement says, staff will learn
company. Current market price of individual share x number of issued real priorities of senior management. Staff that rise up career ladder, are ones
ordinary shares. Represents starting point for any company. Indication of that respond best to real mission. Every aspect of business may be more short
investors’ opinion of company’s net worth or overall value. term focused than is said or is written down. Naturally, this also affects
Dividends – Money paid by company to shareholders out of profits earned. decision making and performance within every business. Quick solutions to
Valuable for investors who hold onto shares for number of years. Higher solve company’s problems as long term strategy swept aside as look at short
dividend payout – less capital for reinvestment. term performance.
1.3 – Understanding that businesses operate within an external environment.
Market Conditions – Tricky period for UK economy between start of recession Changes in interest rates – Interest rate is the price charged by a bank per
in 2008 and 2014, when economy returned to its pre-recession peak. General year for lending money or providing credit. Individual banks decide for
expectation is that the underlying market conditions will be positive, with the themselves about rate charge on credit cards or overdraft. Standard interest
size of markets expanding on a regular basis. Market conditions tough – rate generally 4-5%. The Bank of England committee is asked to set interest
failures as businesses run out of cash. Huge pressures placed on workforce – rates at level that ensures prices rise by 2% per year. Economy grow strongly –
redundancy and real wage cuts. price may rise faster, people worry about borrowing, cut spending, forms do
Factors affecting market conditions include – not increase prices.
Customer taste and fashion – skeptical ‘diet’ claims. Level of interest rate is very important as it affect consumer demand – higher
Disruptive change – new technology – old established produces struggle to rate, lower sales. Interest charges affect total operating costs. Higher rate, less
remain competitive. attractive it is for a firm to invest money into future of business.
Competitive Structure – 70% chocolate held by 3 firms – change – market
change. Demographic factors – make up of the population. Variables include –
Competition – Tighter the economic and market conditions, greater Age (with proportion of old forecast to grow, create opportunities)
competitive pressures. Price cutting was rife in 2009 within markets. Gender (game consoles – tend be male, cosmetics – tend be female)
Competitive pressures stem from more than price. Most modern markets, Ethnicity (opportunities for products targeted at specific ethnicities)
customers are looking for special experiences or uniqueness. – companies Migration – increases size of workforce, lower wage down – lowers cost.
need to invest heavily in research, development, creativity of workforce. Demand – increase in goods and services. Increased cost of public sector.
Changes in household incomes – 2014, real household incomes fell by more
than 6%. First half 2014, supermarkets had 3.2% fall in sales volumes.
Environmental Issues and Fair-trade – Social or moral questions about green
Effects of household incomes –
issues or fair trade supplies – deal more scope to choose what to do. Decide
Changes in the real incomes of the main breadwinners. Number within
to do minimum – profit maximization. Four factors to consider –
household who work – offset some spending pressure, impact of government
Immediate effect on the environment - £80 per ton to dispose materials
decisions on taxation and benefits.
Sustainability – not rob future generations – can lower costs if lower energy
use to avoid fines.
Index numbers and household income – Economic and business data often
Global warming – greenhouse gas emissions.
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, Kalen Harrald – Business Revision
analyzed using index numbers. Index means converting a series of data into Fair-trade supplies – business chooses to sign an agreement raw material
figures that relate to base period where all data equals 100. Advantages is bought through fair trade supplies – favorable to farmers than usual market
that you can understand trends rather more easily, as well as they enable price. – typically, agreements are for 5 years. - increases the cost of materials.
direct comparisons to be made between different data series. PESTLE Analysis –
Political – competition policy, industry regulation, govt spending and tax
policies, business policy and incentives
Economical – interest rates, consumer spending and income, exchange rates,
economic growth (GDP)
Social – demographic change, impact of pressure groups, consumer tastes and
fashions, changing lifestyles
Technological – disruptive technologies, adoption of mobile technology, new
production processes, big data and dynamic pricing
Legal – employment law, minimum / living wage, health and safety laws,
environmental legislation
Ethical / environmental – sustainability tax practices, ethical sourcing,
pollution and carbon emissions.
2 – Managers, leadership and decision making –
2.1 – Understanding management, leadership and decision making –
First significant study was by Henri Fayol. His key book suggested that to Role of Managers –
manage is to forecast and plan, to organize, to command, to co ordinate and Setting objectives – managers need a clear idea of what they want to achieve.
to control. Mints berg identified the 6 characteristics: managers process large This, will depend upon the company wide objectives. The objectives need to
open ended workloads under tight pressure, activities are short in duration, be set clearly and specifically and put into a language all staff understand.
varied, managers prefer action – drive activities and hate letters. They prefer Analyzing – analyzing the underlying conditions the buses face, analyzing the
verbal communications, they maintain relationships mainly with subordinates performance of different staff, and analyzing how effectively objectives are
and external parties. Their involvement the execution of the work is limited being met.
though they initiate many decisions. Leading – inspiring staff commitment to achieve goals, in what ever way
According to Ducker, managers should – set clear objectives that all staff works for individual, - do this by charism, but using power of personal
believe in, find the right team for meeting the objectives, help ensure that all achievements or commitment, as well as leadership through effective control
staff are motivated, as well as preparing staff in general for change. and direction.
Making decisions – ‘getting decisions made’ as manager may delegate the
Leadership styles – task to junior staff. Some decision have to be made by specific deadlines –
Autocratic – authoritarian – tell employees what to do and do not listen much even though this may be too early to have all facts available. Successful
to what workers themselves have to say, tend to use one way top down managers know that they do not have to get every decision right.
communication, give order to workers and do not want feedback. Reviewing – hard to do when outcome from a decision has been poor,
Democratic – involve their workers in decisions. Listen to employees’ ideas therefore it is good practice to insist that every decision be reviewed, - long
and ensure people contribute to the discussion. Communication tends to be run business that succeed will be the ones that learn most from mistakes
two way. Bosses put forward idea and employees give opinion. Regularly Blake and Mouton Managerial Grid –
delegate decision making power to junior staff Looks at two leadership behaviors – concern for people, concern for
Management by Objectives – leader agrees clear goals with staff, allows day performance. It then grades people on each of these scales to formulate
to day decisions made by junior – need to be SMART. judgement in type of leader they are.
Laissez-Faire – let be – when leaders are too busy or lazy, they do not take 9,9 – Teamwork – staff constantly involved in decision making – feel valued.
time to ensure that junior staff know what to do or how to do it. Some 9,1 – Authority / Obedience – fanatical drive to succeed but in leaders own
respond well to freedom, others frustrated. terms – staff truly human resources to be used or cast aside – linked to
Paternalistic Leader – thinks and acts like a father. Tries to do what is best for authoritarian style – too likely succeed in short term. Staff leave long term.
staff, there may be consultation to find out views of employees but decisions 5,5 – Middle of Road – decent, honest attempt to get best of both worlds but
made by head. This boss believes employees need direction but thinks it is struggle to succeed at either.
important that they are supported and cared for properly. Interested in 1,9 – Country Club – boss is really nice person, staff love them, can’t stop
security and social needs of staff. themselves taking advantage of situation, lack of urgency to get things done –
Influences on management style – poor productivity.
Company structure and span of control, particular situation, organization 1,1 Impoverished - neither concern for staff nor performance, related to
culture and tradition, nature of tasks involved, employees and skills and Laissez – Faire. No interest in any of the people that work there.
abilities (low skill – authoritarian, highly skilled – democratic), group size Strengths – measures two factor, other measures one thing. Understanding
(large group – laissez faire, small group – authoritarian), personalities and that some leaders are driven by results and success is why grid is more widely
skills of managers and leaders, time frame ( long time – laissez faire, short known among managers. Labels uses make it easy for managers to visualize
time – authoritarian). the type of person implied.
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