AQA business studies for A2 : revision guide

129 Pages·2010·1.71 MB·English

by  Ian Marcousé

AQA BUSINESS
STUDIES for A2
REVISION GUIDE
SECOND EDITION

Ian Marcousé
Naomi Birchall
Claire Marcousé
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British Library Cataloguing in Publication Data
A catalogue record for this title is available from the British Library
ISBN: 978 1 444 10796 8
First Edition Published 2005
This Edition Published 2010
Impression number 10 9 8 7 6 5 4 3 2 1
Year 2014 2013 2012 2011 2010
Copyright © 2010 Claire Marcousé, Naomi Birchall, Ian Marcousé
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Contents
Introduction 5 Advanced operations
management
1 Corporate objectives and
24 Key AS issues in operations
strategies
management 50
1 Corporate objectives and strategies 2 25 Understanding operational
2 Corporate aims, mission and culture 4 objectives 52
3 Functional objectives and strategy 6 26 Operational strategies: economies
4 Responsibilities to stakeholders and and diseconomies; optimum
society 8 resource mix 54
27 Research and development and
2 Advanced accounting and innovation 56
fi nance 28 Industrial and international location 58
29 Planning operations – including
5 Financial objectives and constraints 10
CPA 60
6 Income statements 12
30 Continuous improvement 62
7 Balance sheets 14
31 Integrated operations
8 Accounting ratios 16
management 64
9 Limitations of accounts 19
10 Financial strategies and accounts 21
6 Advanced external infl uences
11 Investment appraisal 23
32 Introduction to external infl uences 66
3 Advanced marketing 33 Impact on fi rms of economic
variables 68
12 Understanding marketing objectives 26
34 Developments in the world
13 Analysing markets 28
economy: globalisation and
14 Measuring and forecasting trends 30
development 70
15 Selecting marketing strategies 32
35 Impact of government economic
16 Developing and implementing
policy 72
marketing plans 34
36 Government policies affecting
business 74
4 Advanced people in
37 How fi rms respond to potential
organisations
and actual changes 76
17 Key AS people issues 36 38 Business ethics 78
18 Understanding HR objectives and 39 Business and the environment 80
strategies 38 40 Business and the technological
19 Developing and implementing environment 82
workforce plans 40 41 Impact of competitive and market
20 Competitive organisational structure 84
structures 42 42 Internal and external growth:
21 Flexibility and insecurity 44 takeovers and mergers 86
22 Employee relations 46 43 Integrated external issues
23 Integrated people in organisations 48 (including PEST) 88
7 Managing change Answers 98
44 Causes of and planning for change 90
Revision checklists 118
45 Organisational culture 92
46 Making strategic decisions 94
Index 120
47 Implementing and managing
change 96
Introduction
This revision book is written to help push every In addition to this book, it is hugely helpful to:
reader’s A2 results up by at least one grade. It does (cid:79)(cid:3) Use the actual and ‘specimen’ exam papers available
this by focusing the subject content on the exam skills at www.aqa.com
sought by examiners. The writing style is analytic, (cid:79)(cid:3) Go through the specifi cation content, word by word,
but applied to the context of real businesses, just as using the A-Z Business Studies Handbook, Philip Allan
the examiners want. Every chapter points out key 2009 as your companion. This book will be invaluable
evaluative themes within the syllabus. As knowledge for your A2 studies and is widely used by 1st year
of the syllabus counts for only one-fi fth of the marks at university students – so your money will not be wasted
A2 level, revision must do more than re-hash facts and (cid:79)(cid:3) Regularly read articles from Business Review
defi nitions. This Revision Guide teaches the reader to magazine. It will be available in your school/college
develop all the exam skills needed for success, but with library. Look out especially for articles by Andrew
a particular focus on application. Gillespie, Ian Marcousé and Malcolm Surridge.
Each Unit within the book covers a different section
of the A2 specifi cation. All the key concepts are The Authors
explained, with the more diffi cult ones getting longer,
Ian Marcousé has devised the format of the book and
fuller explanations. The content is full of references
edited all the text and questions. Ian was the AS/A2
to real fi rms and application is further enhanced by
Chief Examiner for AQA Business Studies for 11 years
dedicated sections in the Units. There are also questions
and remains a leading author. He is also the founding
to test yourself in every Unit. The answers are set out at
editor of Business Review magazine and an active
the back of the book to provide immediate feedback
classroom teacher.
on how your revision is going.
Naomi Birchall is an experienced teacher and
There are two other features to help build grades: examiner who now works full time as a writer and
(cid:79)(cid:3) At the end of each section (Marketing, Finance and an educational consultant. She writes regularly for
so on) is a fi nal unit containing many questions, Business Review magazine.
including exam-style papers; again, answers are at Claire Marcousé achieved her A grade in AQA
the back to help you study for yourself Business Studies, studied Business and Japanese at
(cid:79)(cid:3) At the back of the book are Revision Checklists to Cardiff University and now teaches Business and
prompt you to consider carefully whether you know Economics (and Japanese, when possible). She teaches
everything you should at Bellerby’s College, Greenwich.
2
1 Corporate objectives and strategies
Unit 1 Corporate objectives and strategies
Some managers are great at the thinking, but weak
What?
at executing the ideas (perhaps because their people-
management skills are weak). Others have the
A corporate objective is a company-wide goal that opposite skill. Needless to say, the star manager is the
must be achieved in order for a fi rm to reach its one who has both.
overall aim. Whereas an aim is a statement of general
intent, an objective should be SMART, that is:
Specifi c – i.e. precise. Which?
Measurable – there must be a way to measure
e whether or not the objective has been met. Survival
d
ui
G Ambitious – challenging for the fi rm to achieve. At the start-up stage of business, the key objective

on Realistic – possible to achieve in the current climate. will often be survival. In order to achieve this the
si business will need to grow and make a profi t but the
vi Time bound – a time by which the objective must be
e fundamental objective is to remain in the market.
R achieved should be stated.
During tough economic times, even large
2
A An example of a SMART objective is: organisations may come back to this basic objective.

or Survival usually relates to the business’s fi nances –
f ‘To increase net profi t from £500m per annum to
s without enough cash to pay its short-term debts,
e £600m per annum in the next fi nancial year.’
di a fi rm cannot survive for long. Therefore strategies
u A corporate strategy is a detailed medium to long- related to survival will often relate to the generation
t
S term plan for meeting the corporate objectives. or speeding up of cash infl ows or the minimisation or
s
s delay of cash outfl ows.
e
n
si
u Profi t
B Why?

A
Q All profi t-making businesses aim to make a profi t in
A Without objectives it may be unclear to middle- the long term. Without profi t, it is impossible to grow
management and staff exactly what they are and – in effect – impossible even to survive. Yet this
aiming to achieve. Having clear and defi ned does not necessarily mean that the key objective at
objectives can give employees focus and potentially one point in time is profi t. Some businesses will be
the motivation to achieve those goals. Who revises willing to forego short-term profi ts in order to grow,
harder? The student who hopes to do as well as with the expectation that this will, in the long term,
they can? Or the one who has to achieve an A* result in increased profi t. Others want profi t, but not
to get into medical school? Objectives also enable necessarily maximised profi ts. They may be happy
management to measure success. This is important to take a reasonable profi t while simultaneously
because good businesses are always learning how achieving another goal, e.g. a farmer determined to
to get better. Meeting – or failing to meet – an only produce food organically.
objective can give pause for thought about what For fi rms that wish to boost profi t, there are many
went right or wrong. possible strategies:
Objectives are just words, though, without the (cid:79)(cid:3) Reduce variable cost per unit – perhaps by
strategies that make things happen. They set out switching to low-cost Far Eastern suppliers.
the actions that need to be taken in order for the (cid:79)(cid:3) Reduce fi xed costs – perhaps by transferring
organisation to achieve its goals. It is important to see backroom offi ce functions to India.
strategy as having two distinct parts: (cid:79)(cid:3) Increase productivity – perhaps by automating
(cid:79)(cid:3) The thinking process (which may involve market a production function, making some staff
research or other forms of quantifi ed analysis). redundant.
(cid:79)(cid:3) The doing process, i.e. making the strategy (cid:79)(cid:3) Increase prices – especially if the product is price
happen. inelastic.
Growth watch its sales falter as shoppers switched to the 3
cheaper supermarkets Asda, Morrisons and Aldi. The
Increasing the size of the fi rm is often the fundamental
management decided that action was needed, so it
objective of established organisations. Growth has
planned a new range of Waitrose Essentials – offering
the following benefi ts:
high quality products at ‘value’ prices. The result was
(cid:79)(cid:3) Increased potential for benefi ting from economies a huge recovery, with 2009 sales rising by 12% at a
of scale – thus enabling costs to be cut. This will
time when sales at posh rival Marks & Spencer Food
enable a fi rm to make higher profi t margins (if the
were still falling.
objective is profi t) or reduce price in order to increase
competitiveness (if the objective is growth).
Porter’s fi ve forces
(cid:79)(cid:3) Growth often leads to an increase in brand
awareness. The larger the organisation the more Michael Porter (author and management guru)
aware customers will be of its existence. theorised that a fi rm’s strength depends on fi ve key
(cid:79)(cid:3) Growth in terms of product range or number aspects, shown in the diagram below.
of stores reduces dependency on key stores or
product lines thus spreading risk.
(cid:79)(cid:3) Especially in the early years of a new product’s New entrants
to the market
life cycle, there is often a feeling that unless the
business has a large market share, it may get
squeezed out of the market by others. Therefore,
if the market is growing fast, the fi rm feels it must
Bargaining The degree Bargaining
grow at least as fast. In this situation, the growth
power with of direct power with
objective is part of a desire for survival. customers competition buyers C
o
r
Diversifi cation p
o
r
Although diversifi cation could be said to be a form of at
e
growth, it is often considered to be an objective in its Substitutes
o
own right. Diversifi cation is the process of entering a new b
je
market with a new product. It can reduce dependence c
on particular products and therefore, if successful, Porter’s fi ve forces can be a useful tool for analysing a tiv
enables risks to be spread. However, although the aim fi rm’s strength in the market and potential threats to es

of diversifi cation is to reduce risk, it is actually a risky those strengths. a
n
objective as entering a relatively unknown market with d

s
a new product has a low success rate. t
A* insight r
a
t
e
Corporate strategy When considering a fi rm’s corporate objectives and gie
A strategy is a medium to long-term plan designed to strategies it is useful to consider the following aspects s
achieve the business’s corporate objectives. It sets out of the organisation:
what activities need to be done, when each must be (cid:79)(cid:3)Do the strategies help to achieve the overall
done by and (in some cases) who is responsible for objective?
carrying out each activity or ensuring it is carried out. (cid:79)(cid:3)Do the objectives and strategy fi t with the culture of
Corporate strategies in themselves are not tasks, the organisation?
but plans that will have a signifi cant effect on the (cid:79)(cid:3)Do the strategies seem feasible given what you
entire organisation. For example, merging with a know about the resources of the organisation? For
competitor, re-focusing on the core products or example, if an objective of growth is to be pursued by
moving into an international market. a strategy of taking over a rival, is the organisation’s
balance sheet strong enough to support this?
Successful corporate strategies
If a strategy is to succeed, the fi rm must ensure
Test yourself (20 marks)
that it fi ts with both its strengths and the current
environment in which it is operating. 1 What is meant by the term ‘corporate objective’? (2)
2 Why is ‘to grow’ not a SMART objective? (3)
3 Explain why diversifi cation can be risky. (4)
Application
4 Explain how diversifi cation aims to spread risk. (4)
5 What is meant by the term ‘corporate strategy’? (2)
Waitrose is a supermarket chain known and used
6 State each of Porter’s fi ve forces. (5)
for its quality not for its price. In 2008 it had to
4
Unit 2 Corporate aims, mission and culture
What? Application
Aim – a general statement of intended direction, In the years that led up to the 2008 Credit Crunch,
from which more specifi c goals (objectives) can be there were lots of clues about the culture (attitudes
set. An example of an aim might be ‘to become as and behaviours) among investment bank staff.
big as we can be’. Courts in London and New York had revealed an
extreme macho culture in which female staff were
Mission – an almost religious zeal to achieve
treated as second-class citizens, and drug-taking
something extraordinary. In the early years of Innocent
was widespread. In a series of court cases, women
Drinks, staff felt fantastic about their part in a small
gained big compensation payouts in unfair dismissal
business that was converting people from drinking
cases (sacked for standing up for themselves). It was
fi zzy, chemical drinks to drinking 100% fruit smoothies.
clear in 2006 and 2007 that things had got out of
They felt that they were changing the world for the
hand. Yet the senior directors of the banks stood back
e better, which is the effective defi nition of a mission.
d and let reckless staff do reckless things, while profi ts
ui Many managements envy the (few) businesses fl owed in. The directors should have reacted to the
G whose staff share a real sense of mission. To capture
n amoral culture among staff by demanding wholesale
o the same sense of inspiration, they may involve staff
changes. Instead, they blundered on until crisis hit.
si in devising a mission statement. This sets out the
vi
e aims of the organisation but written in such a way
R
2 as to inspire and enthuse stakeholders. A well-known Which?
A example is: ‘To refresh the world’ (Coca-Cola).

r
o
f Culture – the culture of an organisation is the accepted The mission model
s
e behaviours, attitudes and ideals embedded within
di that organisation and adopted by the workforce. The mission model sets out in detail the value of a
u
St clear mission. Its purpose is to give a basis for four

s key elements within an organisation (purpose, values,
es Why?
n strategy and standards and behaviours) to develop in
si the same direction.
u
B Aims

A
Q
A Exist to provide direction for the organisation. It PURPOSE
forms the basis for setting the objectives.
Mission
STRATEGY VALUES
A mission statement exists to inspire existing and
potential stakeholders to take a positive view of the
organisation. It may also act as a public relations tool.
STANDARDS AND
BEHAVIOURS
Culture
Culture is something that exists regardless of whether
or not it is intended to exist. It has no reason for The Mission Model (Campbell, et al, 1990)
existence – it is just there. The reasons why it is
PURPOSE: This refers to the reason for the business
important however are numerous. It affects the
to exist.
behaviour and attitudes of staff and therefore can
affect fi rms in the following ways: VALUES: Beliefs held by the organisation and the
(cid:79)(cid:3) motivation people it employs.
(cid:79)(cid:3) productivity
STANDARDS: The expected level of performance and
(cid:79)(cid:3) attitude to quality
quality.
(cid:79)(cid:3) attitude to wastage
(cid:79)(cid:3) absenteeism STRATEGY: A medium to long-term plan for meeting
(cid:79)(cid:3) ethical standards. objectives.
Campbell’s theory suggests that the mission statement (cid:79)(cid:3) The attitude and behaviour of management 5
is the key to linking these four factors. Critics believe that – This will be particularly important in small
writing a mission statement on paper achieves little; a organisations where the owner/manager will tend
mission statement is not the same as a real mission. to have a lot of contact time with employees.
(cid:79)(cid:3) The aims and objectives of the organisation
– An aim of profi t maximisation may result in a
Building culture
very different organisational culture than an aim of
Culture is the way that things are done and people growth or innovation.
act in an organisation. It includes the accepted and (cid:79)(cid:3) The attitude of management to risk – If
expected behaviours and attitudes in the workplace. management is risk averse, this will develop a
It takes time to develop and can be affected by: culture of caution and mistake avoidance.
Causes Effects
An entrepreneurial • The marketplace may mean there are • Bright young staff want to join a
culture huge new opportunities emerging, business where they may have scope
e.g. the early days of the mobile for taking bold new initiatives.
phone market. • More initiatives mean more mistakes,
• Internal promotions given to bold but hopefully successes will outweigh
decision-makers, not on seniority. failures.
A selfi sh, personal • Payment systems with a high bonus • Decisions will be focused on the
culture element will make people follow the short-term, even if they may have
money. awful potential consequences later. C
o
• If there is a hire-and-fi re approach to • Without teamwork and a team spirit r
p
staffi ng, people will protect there is no potential for bright ideas o
r
themselves to try to keep their jobs. benefi ting from discussion. a
t
e
A highly ethical • The business owners may have strong • Business growth might be held back
a
culture religious or moral commitments. by refusing profi t-focused shortcuts im
s
• The ownership structure may not be such as discussing prices with rivals ,

m
profi t-focused, e.g. a worker (which is illegal, but quite common).
is
cooperative such as John Lewis. • Yet John Lewis has shown that high s
io
standards can cement customer n

loyalty. a
n
d

c
Exam insight Themes for evaluation u
ltu
r
In most successful businesses aims, mission and Evaluation requires questioning and judgement of the e
culture fi t together to provide a sound foundation business’s aims, culture or mission. This could include:
for the whole organisation. If the staff believe in (cid:79)(cid:3)criticism of the culture for encouraging unethical
the company, that not only helps their motivation, behaviour
but also spreads by word of mouth to potential (cid:79)(cid:3)questioning whether the organisational aim is right
employees. Bright young people are keen to fi nd in the current economic/competitive environment
work at a company that seems decent and seems to (cid:79)(cid:3)questioning whether the culture, aims and mission
be going places. fi t together
When reading a case study it is useful to consider (cid:79)(cid:3)judgement of whether the organisational culture is
whether the aims, mission and culture really fi t driving the organisation forward or holding it back.
together. In particular, ask yourself whether managers’
actions fi t with their words. If they are contradictory
Test yourself (20 marks)
it would be right to suspect a public relations stunt
rather than something authentic. 1 What is the difference between an aim and an
For example, a business may claim that its aim objective? (3)
is to ‘improve the lives of all stakeholders involved 2 What is the difference between an aim and a
in the organisation’. Yet its workplace culture may mission statement? (3)
promote short-term target-hitting behaviour and 3 Why is culture important in an organisation? (4)
reward questionable behaviour as long as profi ts are 4 Give two factors that can affect organisational
generated. This contradiction would clearly suggest culture. (2)
that the publicly-stated aim is simply for PR purposes. 5 Why is it important that aims, mission and culture
fi t together rather than clash with one another? (4)
6 According to the mission model, what is the
purpose of mission statements? (4)