Key term
OCR A-Level Business (H431) H431
Introduction to Business
Topic overviewEntrepreneurs, enterprise and the value they createLand, labour, capital and enterpriseSectors of industry, forms of ownership and the reach of a marketSole traders, partnerships, companies and limited liabilityChoosing a legal structure and what it means for stakeholdersFranchising and co-operativesThe functions of a business and how they depend on each otherMeasuring the size of a business, and what limits its growthJoint ventures and strategic alliances
Business Objectives and Strategy
Topic overviewAims, objectives and the hierarchy that links themSetting SMART objectivesCommunicating and revising business objectivesStakeholders and their objectivesStakeholder conflict and its managementStakeholder power and influenceMission statements and business purposeCorporate social responsibility and the profit trade-offBuilding and judging a CSR profileStrategy, tactics and implementationThe business plan and the Plan-Do-Review cycleRisk and rewardQuantifiable and unquantifiable riskUncertainty and its causesOpportunity cost in business decisionsContingency planning and crisis managementPorter's Five ForcesPorter's generic strategies and competitive advantageThe purpose of performance measurementFinancial measures of business performanceRatio analysis: profitability, liquidity and efficiencyNon-financial measures of business performanceForecasting and its limitsQualitative forecasting methodsForecasting sales, costs, profit and cash flowTime series analysis and moving averagesCorrelation, extrapolation and index numbersThe business decision-making processDecision trees and expected valuesAnsoff's matrixConflicting results from decision-making toolsCauses, types and barriers to changeChange management models: Lewin, Kotter and 7-SLeading change and using external consultants
External Influences
Topic overviewThe market, its size, growth and shareMarket structures and a firm's decision-making powerDemand, supply and their determinantsEquilibrium, shortages and surplusesMarket forces and the dynamic marketPhysical and non-physical marketsCompetition, and barriers to entry and exitMarket dominance and how it is regulatedGlobalisation and the forces driving itMultinationals, global strategy and global brandsInternational trade, its barriers and its practicalitiesExchange rates and currency conversionFree trade, trading blocs and the European UnionEmerging markets and the changing global environmentPolitical factors and political stabilityThe business cycle and key economic indicatorsTaxation, government spending and subsidiesMonetary, fiscal and supply-side policySocial factors and changing consumer lifestylesTechnology in business and technological changeThe digital revolution and the information ageBusiness ethics and ethical tradingManaging conflicts between ethical and other objectivesLegislation, compliance and the cost of breaking itEnvironmental issues and environmental policySustainability in practiceReading the external environment and the cost of ignoring it
Accounting and Finance
Topic overviewAccounting and finance objectivesSources of finance and the choice between themA true and fair view and the accounting conventionsCosts, revenue and profitCost classification and costing methodsContribution and the break-even pointMargin of safety and target profitBreak-even charts, stepped fixed costs and special ordersPayback period and average rate of returnNet present value and the investment decisionBudgets and variance analysisCash-flow forecasts and cash-flow statementsCash-flow problems and working capitalThe income statement and measures of profitThe statement of financial positionDepreciation and the valuation of assetsLiquidity and solvency ratiosProfitability and efficiency ratiosShareholder ratios and the limits of ratio analysisExternal influences and the finance strategy
Human Resources
Topic overviewHuman resource objectivesChain of command, span of control and delegationTall, flat, matrix and divisional structuresOrganisational culture and what shapes itFormal and informal communication and group normsVerbal, non-verbal and electronic communicationThe communication model and barriers to communicationWorkforce planningFlexible working practicesRecruitment and the choice between internal and external hiringSelection methods: interviews, tests and referencesTraining methods and training needs analysisAppraisal: 360°, peer and self-assessmentMeasuring workforce performance: turnover, absenteeism and productivityRedundancy and fair dismissalUnfair dismissal, grievance procedures and employment tribunalsThe functions of managementLeadership theories and stylesMaslow, Herzberg and the theories of motivationMonetary and non-monetary motivation in practiceEmployee relations and employment legislationTrade unions and employee participationExternal influences on human resourcesThe human resources strategy
Marketing
Topic overviewMarketing objectives and why a business sets themMarketing resources and SWOT analysisPrimary market research and trial marketingSecondary market research and desk sourcesSampling methods and sample reliabilityNormal distribution and standard deviationMarket share and market growthUsing market analysis to make decisionsConsumer buying behaviour and the marketing modelsNiche marketing and mass marketingCustomer orientation, product orientation and customer serviceMarket segmentationCustomers, consumers and business-to-business marketingThe product life cycle and its stagesExtension strategiesThe marketing mix and the marketing strategyProduct, USP, branding and differentiationThe Boston matrix, Ansoff's matrix and portfolio analysisPricing strategiesPrice and income elasticity of demandCross elasticity and advertising elasticity of demandPlace and channels of distributionPromotion above the line, below the line and digitalService marketing and the extended marketing mixExternal influences on marketing
Operations Management
Topic overviewOperations objectives and operations strategyAdded value and how it is measuredInnovation and research and developmentJob, batch, flow and cell productionSpecialisation and the division of labourService provision and customer serviceProject management and Gantt chartsCritical path analysis and network diagramsPERT and the limits of project planningProductivity and how to raise itEconomies and diseconomies of scaleCapacity utilisation and capacity managementStock control charts and reorder levelsReordering systems and the cost of holding stockLean production, just in time and kanbanTechnology in operationsQuality control, quality assurance and TQMExternal quality standards and benchmarkingChoosing a location for a businessLogistics and supply chain managementOutsourcing, offshoring and re-shoringExternal influences on operations
Business Objectives and Strategy
Quantifiable and unquantifiable risk
- 1 thing to know
- Components 01, 02 and 03
Overview
Recall questions on quantifiable and unquantifiable risk with examples, why only measurable risks are insurable, ways to reduce risk including market research, hedging, buffer stock and dual sourcing, the consequences of poor risk management, and the risks an entrepreneur bears under unlimited liability.
What you need to know
Answer each one before you reveal it.
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Questions from this subtopic
Each one with the model answer underneath.
- 1
What is a quantifiable risk?
Model answer
A quantifiable risk is one whose probability and financial impact can be estimated with reasonable confidence, usually from past data.
- 2
Give two examples of quantifiable risk.
Model answer
The risk of bad debts, estimated from the proportion of past customers who failed to pay, and the risk of machine breakdown, estimated from maintenance records.
- 3
What is an unquantifiable risk?
Model answer
An unquantifiable risk is one whose likelihood or impact cannot sensibly be measured, because there is no comparable past experience on which to base an estimate.
- 4
Give two examples of unquantifiable risk.
Model answer
A sudden shift in consumer taste, and the damage that a reputational scandal would do to future sales.
- 5
Why can quantifiable risks usually be insured while unquantifiable ones cannot?
Model answer
An insurer needs a measurable probability in order to set a premium, so risks with no reliable data behind them are not offered cover.
- 6
Why does the distinction between quantifiable and unquantifiable risk matter in decision making?
Model answer
Quantifiable risks can be built into an expected value calculation, while unquantifiable ones have to be handled by judgement, contingency planning and caution.
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