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Business Studies AS Level Notes 9609 - 2020 Syllabus
Business Studies A level (9707)
University of Cambridge
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BUSINESS STUDIES AS
LEVEL NOTES 9609
Contents
- Contents...........................................................................................................................................................................
- Business & Its Environment..........................................................................................................................................
- 1 Enterprise................................................................................................................................................................
- 1 Business Structure..................................................................................................................................................
- 1 Size of Business....................................................................................................................................................
- 1 Business Objectives..............................................................................................................................................
- 1 Stakeholders in A Business...................................................................................................................................
- 2 People in Organisations...............................................................................................................................................
- 2 Management & Leadership...................................................................................................................................
- 2 Motivation..............................................................................................................................................................
- 2 Human Resource Management (HRM).................................................................................................................
- 3 Marketing.....................................................................................................................................................................
- 3 What Is Marketing?...............................................................................................................................................
- 3 Market Research...................................................................................................................................................
- 3 The Marketing Mix.................................................................................................................................................
- 4 Operations & project management..............................................................................................................................
- 4 The nature of operations.......................................................................................................................................
- 4 Operations planning..............................................................................................................................................
- 4 Inventory management..........................................................................................................................................
- 5 Finance & accounting..................................................................................................................................................
- 5 The need for business finance..............................................................................................................................
- 5 Sources of finance................................................................................................................................................
- 5 Costs.....................................................................................................................................................................
- 5 Accounting fundamentals......................................................................................................................................
- 5 Forecasting & managing cash flows......................................................................................................................
- Revision and How to Answer Questions.....................................................................................................................
- Credits.........................................................................................................................................................................
the nature of economic activity - The item of lesser value is left out when making a choice (due to scarcity) - It is the purpose of economic activity to provide for as many of our wants as possible, yet we are still left wanting more.
wants & needs
Needs – things that we cannot survive without. The basic human needs can be classified as: a. Social – entertainment b. Physical – food, warmth, shelter c. Status – sense of achievement, good job, large house, etc. d. Security – privacy, steady job, secure homes, etc.
Wants – are the things that we can survive without e. Cell phones, radios, jewellery etc. Human wants are unlimited but the resources to satisfy them are limited in supply. This gives rise to the basic economic problem.
the problem of choice - (youtu/suecepimwre) - The economic problem – there are insufficient goods to satisfy all of our needs & wants at any one time - Shortage of products & resources = having to make choices. - As we cannot satisfy all of our wants, then we must choose those which we will satisfy now & those which we will forgo. If we are careful & rational, we will choose those things that give us the greatest benefit, leaving out those things of less value to us. - This need to choose is not exclusive to people as consumers. All economic units have to make choices – governments, businesses, workers, charities & so on.
opportunity cost - Opportunity cost : the benefit of the next most desired option which is given up. - E. If a consumer chose to buy salad over fries, fries would be the opportunity cost - In deciding to purchase one item, we must give up other goods as they cannot all be purchased. - The next most desired product given up becomes the ‘lost opportunity’ / opportunity cost. - This concept exists for all economic decision makers - consumers, businesses & government.
business environment is dynamic - Setting up a new business is risky because the business environment is dynamic (constantly changing) - The risk of change can make the original business idea much less successful. - New businesses may turn from successful to loss-making (fail) due to - (let b) Competitors (other b usinesses) L egal changes-outlaw products, e. Outlawing the product altogether Market/customers has less to spend ( e conomic) Obsolesce ( t echnological), the methods used become old-fashioned & expensive.
why many businesses fail early on - Lack of record keeping - Lack of cash & working capital - Poor management skills - Changes in the business environment
what a business needs to succeed
1.1 The Role of The Entrepreneur (youtu/xzvjvdy-Dhk) qualities of successful entrepreneur (crilms)
- Commitment & self-motivation
- Risk taking
- Innovation
- Leadership skills
- Multiskilled
- Self-confidence & an ability to bounce back
the role of the entrepreneur - Have an idea for a new business - Invest some of their own savings & capital - Accept the responsibility of managing the business - Accept the possible risks of failure.
challenges faced by entrepreneurs - (youtu/_o3fyhwx0ro) - Identifying successful business opportunities - Sourcing capital - Determining a location - Competition - Building a customer base
- Secondary sector : firms that manufacture & process products from natural resources. E. Computers, brewing, baking, clothes-making & construction
- Tertiary sector : firms that provide services to consumers & other businesses. E. Retailing, transport, insurance, banking, hotels, tourism & telecommunications
the public & private sectors
- (youtu/dr_ohenquqk)
- Public sector : comprises of organisations accountable to & controlled by central / local government (the state).
- Private sector : comprises businesses owned & controlled by individuals / groups of individuals.
changes in business activity
(youtu/fcqrc88tyse)
Industrialisation : a growing importance of the secondary sector manufacturing industries in developing countries.
The relative importance of each sector is measured in terms either of employment levels / of output levels as a proportion of the whole economy.
In developed economies, there is a decline in the importance of secondary-sector activity & an increase in the tertiary sector. This process is termed deindustrialisation. Rising incomes due to higher living standards = consumers spend on services rather than more goods = growth in tourism, hotels & restaurant services, financial services, etc. The rest of the world industrialises making manufacturing businesses in developed countries less competitive because developing countries are more efficient & use cheaper labour = rising imports of goods (smaller market for domestic secondary sector firms).
types of economies
Economy : the state of a country / region in terms of the production & consumption of goods & services, & the supply of money
Mixed economy : economic resources are owned & controlled by both private & public sectors.
Free-market economy : economic resources are owned largely by the private sector w/ very little state intervention.
Command economy : economic resources are owned, planned & controlled by the state.
1.2 Legal Structures
different types of legal structure
- Unlimited liability a. Sole trader : a business in which one person provides the permanent finance &, in return, has full control of the business & is able to keep all of the profits (youtu/lljb9nb07xa)
b. Partnerships: a business formed by two / more people to carry on a business together, w/ shared capital investment &, usually, shared responsibility (youtu/LM1DvORE9KY)
- Other forms of business organisation
a. Cooperatives : business organisations owned & controlled by a group of people to undertake an economic activity for mutual benefit (youtu/90FL_bBE4mw) Consumer cooperatives: members buy goods in bulk, sell them, & divide the profits between members Worker cooperatives : workers buy the business & run it; decisions & profits are shared by the members. Producer cooperatives : producers organise distribution & sale of products themselves
b. Franchises : a business that uses the name, logo & trading systems of an existing successful business; based upon the purchase of a franchise licenser from the franchiser (youtu/kooewuilbng)
c. Joint ventures : where two / more businesses agree to work closely together on a particular project & create a separate business division to do so.
d. Holding companies : a business organisation that owns & controls a number of separate businesses, but does not unite them into one unified company. They often have separate businesses in different markets w/ diversified interests. e. Public corporations : businesses enterprise owned & controlled by the state. They often do not have profit as a main objective.
concept of limited liability & its importance - Limited liability : the only liability – potential loss – a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder. This has two important effects: People are prepared to provide finance to enable companies to expand. The greater risk of the company failing to pay its debts is now transferred from investors to creditors. As a result, they are very interested in both checking whether the word ‘limited’ appears in the business name & scrutinising the company’s accounts for signs of potential future weakness.
problems resulting from changing from one legal structure to another - Changing from sole trader to partnership Sharing profits Interference in decision-making Bad decision of one partner affects all partners - Changing from partnership to limited company Owners may lose control Legal work required Financial accounts have to be made public Decrease in privacy
1 Size of Business....................................................................................................................................................
1.3 Measurements of Business Size
different methods of measuring the size of a business (profit is not an acceptable measure of business size) (comers)
(youtu/gqgarfdpx1c)
Capital employed – generally the larger the business, the greater the value of capital needed. However, comparisons in different industries may be misleading e. A hair dresser & an optician Capital employed : the total value of all long-term finance invested in the business
Other measure – e. Occupied hotel rooms, number of shops, total floor space
Market capitalisation – businesses w/ higher market capitalisation are generally larger, however it can only be used w/ businesses that have shares on the stock exchange. Due to the fluctuations, it can be very unstable to compare. Market capitalisation : the total value of a company’s issued shares Market capitalisation = current share price × current no. Of shares
Number of employees – a larger number of employees suggests a larger business. It is the simplest method & easy to understand, however it does not represent a business which requires little amounts of workers.
the importance of small businesses & their role in the economy
Job creation – small businesses usually employ a significant proportion of a working population
Entrepreneurs – small businesses are normally run by entrepreneurs; creates variety & choice in the market
Competition – more competition for larger businesses causes an increase in quality of goods
Specialist goods – they may form niche markets
Lower average costs – small firms do not have to pay as much as big firms to produce their products
Supplier to larger businesses – small firms can supply goods to larger firms
government assistance for small businesses
Reduced rate of tax on profits (corporation tax)
Loan guarantee scheme
Information, advice & support
Financing workshops e. Training, unemployment
Helping particular issues e. Specialist management expertise, start-up finance, marketing risks, finding the correct location
1.3 Internal Growth
- why & how a business might grow internally
- Internal growth : expansion of a business by means of opening new branches, shops / factories (also known as organic growth).
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- benefits of business growth
- Increased profits – expanding the business & achieving higher sales is one way of becoming more profitable.
- Increased market share – this will give a business a higher market profile & greater bargaining power w/ both suppliers (e. Lower prices) & retailers (e. Best positions in the shop).
- Increased economies of scale
- Increased power & status of the owners & directors – e. The opportunities to gain publicity / influence government policy will increase if the business controlled by the owners / directors is large & well-known.
- Reduced risk of being a takeover target – a larger business may become too large a target for a potential ‘predator’ company.
1 Business Objectives
1.4 Business Objectives in The Private Sector & Public Sector
- the nature & importance of business objectives
- Why set aims? (youtu/2x-equux-lq) They highlight key areas of development They help businesses keep a focus upon key areas They outline the ‘destination’ of where the company wants to reach
Provides a framework which strategies & plans can be drawn up
Why set objectives? Objectives give the business a clearly defined target Enables businesses to measure progress towards its aims Can help motivate employees
Hierarchy of objectives : the aims & objectives of a firm are placed in descending order of strategic importance. (youtu/bpasq6gv0r0) Aim – where the business wants to go in the future; its goals. Mission – the result that an organization is trying to achieve through its plans / actions Corporate objectives – the long-term goals of the corporation that give focus & direction to the business. These form the foundation for the strategic plans for the business.
Smart S – specific : objectives should be focused on what the business does, applied directly & be specific to that business. A hotel may set an objective of 75% bed occupancy over the winter period. M – measurable : objectives that have a quantitative value are likely to be more effective for employees to work towards. E. To increase sales in the south-east region by 15% this year. A – achievable : setting objectives that are almost impossible in the time frame given will demotivate staff R – realistic & relevant : objectives should be realistic when compared w/ the resources of the company & should be expressed in terms relevant to the people who have to carry them out. So, informing a factory cleaner about ‘increasing market share’ is less relevant than a target of reducing usage of cleaning materials by 20%. T – time-specific : It will be impossible to assess if the objective has actually been met without a time limit
corporate social responsibility (CSR) as a business objective
Corporate social responsibility : the concept that accepts that businesses should consider the interests of society in their activities & decisions, beyond the legal obligations that they have.
relationship between mission statement, objectives, strategy & tactics
Mission statement : a statement of the business’s core aims, phrased in a way to motivate employees & to stimulate interest by outside groups.
- Change in legislation – a change in government laws can force a business to come up w/ new objectives in a new environment
translation of objectives into targets & budgets
Management by objectives : a method of coordinating & motivating all staff in an organisation by dividing its overall aim into specific targets for each department, manager & employee (youtu/a9m6K73Omsc)
the communication of objectives & their likely impact on the workforce
If employees are unaware of the business objectives then how can they contribute to achieving them?
Communication of corporate objectives – & translating these into individual targets – is essential for the effective setting of aims & objectives.
If employees are communicated w/ – & involved in the setting of individual targets – then these benefits should result in: Employees & managers achieving more – through greater understanding of both individual & companywide goals. Employees seeing the overall plan – & understanding how their individual goals fit into the company’s business objectives. Creating shared employee responsibility – by interlinking their goals w/ others in the company. Managers more easily staying in touch w/ employees’ progress – regular monitoring of employees’ work allows immediate reinforcement / training to keep performance & deadlines on track.
how ethics may influence business objectives & activities
Ethical code (code of conduct): a document detailing a company’s rules & guidelines on staff behaviour that must be followed by all employees. (youtu/xntkjqxceie)
Ethics – the moral guidelines that determine decision making
For: Against: Avoid court-cases & fines Increases costs Good PR & increased sales volume Reduction in pester power Attract ethical customers No price fixing → reduction in prices & profits Gov. Contract likely Fair wages increase costs & reduces competitiveness Attract well qualified staff
1 Stakeholders in A Business...................................................................................................................................
1.5 Business Stakeholders
individuals / groups interested in the activities of business
Stakeholders : people / groups of people who can be affected by – & therefore have an interest in – any action by an organisation.
Stakeholder concept : the view that businesses & their managers have responsibilities to a wide range of groups, not just shareholders
roles, rights & responsibilities of stakeholders (youtu/t1m0zffibju)
2 People in Organisations
2 Management & Leadership...................................................................................................................................
2.1 Management & Managers
the functions of management, including mintzberg’s roles of management
Manager : responsible for setting objectives, organising resources & motivating staff so that the organisation’s aims are met.
Mintzberg’s management roles (youtu/ngkqyrqxkts)
**Role title Description of role activities
- Interpersonal roles:** dealing w/ & motivating staff at all levels of the organisation Figurehead Symbolic leader, takes on social / legal nature Leader Motivating subordinates, selecting & training staff Liaison Linking w/ managers & leaders of other divisions of the business & other organisations 2. Informational roles: acting as a source, receiver & transmitter of information Monitor (receiver) Collecting data relevant to the business operations Disseminator Sending information collected from internal & external sources to the relevant people within the organisation Spokesperson Communicating information about the organisation, i. Current position & achievements, to external groups & people 3. Decisional roles: taking decisions & allocating resources to meet the organisations’ objectives Entrepreneur Looking for new opportunities to develop the business Disturbance handler
Responding to changing situations that may put the business at risk, assuming responsibility when threatening factors develop Resource allocator Deciding on the spending of the organisation’s financial resources & allocation of physical & human resources Negotiator Representing the organisation in all important negotiations
- Functions of management: Setting objectives & planning – establishing of overall strategic objective translated into tactical objectives. Planning needed to put the objectives into effect also made. Organising resources to meet the objectives – recruitment, giving authority & accept accountability. Clear division of tasks for each section/dept. To work towards common objectives Directing & motivating staff – guiding, leading & overseeing employees to ensure organizational goals are met. Staff development included. Coordinating activities – ensure consistency & coordination between different parts of the firm. Establish common sense of purpose & ensure resources are used correctly. Controlling & measuring performance against targets – appraising performance against targets, take appropriate action & provide feedback.
2.1 Leadership
functions, roles & styles
Leadership : the art of motivating a group of people towards achieving a common objective.
Delegation : passing authority down the organisational hierarchy
Empowerment : allows workers some degree of control over how their task should be undertaken
the purpose of leadership
The purpose of leadership is to guide the people in an organization to work towards the attainment of common organizational goals. The leader brings the people & their efforts together to achieve common goals.
leadership roles in business (directors, managers, supervisors, worker representatives)
Directors – head of major functional department, elected senior members, objective meeting, communication
Manager – manage people, resources, decision making. Direct, motivate & discipline.
Supervisor – management appointed, responsible for goal achievement, work in a cooperative manner.
Worker representative – worker elected, discuss concerns.
qualities of a good leader
Desire to succeed & natural self-confidence that they will succeed.
Ability to think beyond the obvious – to be creative – & to encourage others to do the same.
Multitalented, so that they can understand discussions about a wide range of issues affecting their business.
Have an incisive mind that enables the heart of an issue to be identified rather than unnecessary details.
2.1 Choice of Leadership Style
leadership styles: autocratic, democratic, laissez-faire
(youtu/olmmdmm52pq)
Autocratic : a style of leadership that keeps all decision making at the centre of the organisation. Lower levels of the hierarchy are given little delegated authority & communication is usually just one way. <
Democratic : a style of leadership that allows the majority opinion of staff to influence decisions. It involves a great deal of participation from the workforce but can be time consuming.
,
Laissez-faire : a style of leadership that leaves much of the running & decision making of the business to the workforce. This may be appropriate in research & development departments staffed by skilled specialists that are self-motivated.
Paternalistic leadership : a leadership style based on the approach that the manager is in a better position than the workers to know what is best for an organisation.
McGregor’s leadership styles
McGregor’s theory x – managers believe the workers dislike work, will avoid responsibility & are not creative
McGregor’s theory y – managers believe that workers can derive as much enjoyment from work as from rest & play, will accept responsibility & are creative
Business Studies AS Level Notes 9609 - 2020 Syllabus
Module: Business Studies A level (9707)
University: University of Cambridge
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