Key term
OCR A-Level Business (H436) H436
Business Activity
Topic overviewBuying, selling and adding valueSpotting an opportunity and starting a businessEntrepreneurs and intrapreneursRisk, reward and uncertaintyBusiness objectives: profit, growth, survival and sustainabilitySMART objectives and the usefulness of objectivesPrimary, secondary and tertiary sectorsSole traders and partnershipsPrivate and public limited companiesLiability, legal status and choosing an ownership structureSocial enterprises and not-for-profit organisationsThe stakeholders of a businessWhat each stakeholder wants from a businessConflicting stakeholder objectivesMeasuring the size of a businessOrganic growth and franchisingMergers, takeovers, integration and diversificationFactors influencing the scale of operationsEconomies and diseconomies of scaleMarket power and overtradingStages of the customer journeyCustomer experience and how it is measured
Marketing
Topic overviewThe purpose of marketing and the unique selling pointMarket orientation and product orientationWhy a business researches its marketPrimary research: questionnaires, focus groups and observationSecondary research sources and their reliabilityRandom, stratified and systematic samplingQualitative and quantitative research dataMarket size, market share and market growthConsumer markets and business marketsMass markets and niche marketsSegmenting a market into customer groupsNew product development, innovation and R&DThe product life cycle and extension strategiesThe Boston Matrix and product portfolio analysisSkimming, penetration and cost-plus pricingCompetitor, psychological, dynamic and freemium pricingPrice and income elasticity of demandAdvertising, sponsorship and public relationsSales promotion, direct mail and point of saleBranding and packagingSocial media, influencers and content marketingWebsites, search engine optimisation and pay-per-click advertisingDistribution channels, e-commerce and intermediariesWhy businesses forecast their salesHistorical sales forecasting and the line of best fitIntuitive forecasting and forecasting for a new productBig data and artificial intelligence in marketingGamification, virtual reality and augmented realityComplaints, reviews and the net promoter score
People
Topic overviewHuman resource management and workforce planningFull-time, part-time, permanent and temporary contractsFlexible, shift and remote workingOrganisational design, flexibility and intrapreneurshipTall, flat, matrix and divisional structuresLevels of hierarchy, span of control and delayeringAuthority, delegation and centralisationWhy motivation matters at workSalary, wages, piece rates and commissionBonuses, profit sharing, pensions and fringe benefitsRecognition, empowerment and job designWork-life balance, wellbeing and inclusion at workLeadership, vision and company cultureAutocratic, democratic and transformational leadershipEmployee voice, suggestion schemes and works councilsTrade unions, collective bargaining and strikesRedundancy, fair dismissal and unfair dismissalInternal and external recruitmentCVs, interviews and assessment centresThe benefits of training and developmentInduction, on-the-job and off-the-job trainingCoaching, mentoring, shadowing and apprenticeshipsEmployee turnover and retentionAbsenteeism and employee productivity
Operations
Topic overviewThe purpose of operations and the transformation processAdded value and how it is calculatedWays of adding value: convenience, branding, design and facilitiesSustainability as a way of adding valueAutomation, robotics and 3D printing in productionAI, cloud services and digital technology in productionEfficiency, effectiveness and productivityMeasuring and improving productivityProduction quality: purpose and standardsQuality control and quality assuranceCapacity utilisation and how it is calculatedManaging capacity: increasing output, cutting capacity and outsourcingTypes of inventory and the purpose of inventory controlInventory control charts, re-order levels and lead timeJust In Time and inventory management systemsThe stages of supply chain managementLogistics: procurement, transport and reliability of supplyKey performance indicators in operations
Finance
Topic overviewThe finance function and business failureAssets, liabilities and capitalCash, profit and working capitalCost behaviour and sales revenueContribution and the break-even pointBreak-even charts and the margin of safetyUsing contribution to make short-term decisionsLevels of profit and profit marginsBudgets and budget settingBudget variancesCash flow forecasting and its usesThe structure of a cash flow forecastRemedies for a cash flow shortageLiquidity, the current ratio and the acid testRetained profit, owners' investment and asset salesLoans, overdrafts and other debt financeShare capital, venture capital, crowdfunding and grantsChoosing a source of financeFinancial statements and who uses themThe income statementThe statement of financial position (balance sheet)Return on capital employed and gearingInventory turnover, receivable days and payable daysRatio analysis and its limitations
External Influences
Topic overviewDemand, supply and the market mechanismPrice, income and the drivers of demandCosts, capacity and the drivers of supplyRivalry, market share and competitor behaviourImports, exports and the case for open tradeTrade barriers and trade agreementsExchange rates and the value of the poundCulture, law and politics in overseas marketsThe forces behind a globalised marketPolitical stability and the reach of government policyThe business cycle and the state of the economyInterest rates, tax and subsidiesDemographics, lifestyle and cultural changeShopping habits, communities and pressure groupsArtificial intelligence, automation and roboticsCybersecurity, cloud services and connected devices
Strategy, Risk and Managing Change
Topic overviewBusiness planning and the reduction of riskThe uses and limitations of a business planBusiness strategy and the interdependence of business decisionsSWOT analysisPEST analysisThe Ansoff matrixPorter's five forcesOpportunity cost, risk and uncertainty in decision makingThe stages of making a business decisionCorporate planning from objectives to evaluationHandy's four organisational culturesThe payback periodAverage rate of returnNet present value and discounted cash flowJudging an investment decisionContingency planning and disaster recoveryCrisis management and the response to a crisisInsurance and the protection it gives a businessInternal and external causes of changeThe effects of change on a businessBarriers to change and resistanceLewin's force field analysisCritical path analysis and the critical pathTotal float, free float and the use of a networkMonitoring change with quantitative and qualitative dataEthical treatment of workers and suppliersEthical marketing and community engagementConsumer and employee protection lawPollution, waste and the environmental auditSustainability, net zero and the circular economyESG reporting
Business Activity
- 22 subtopics
- 45 things to know
- Component 01
What Business Activity covers
Business Activity is examined in Component 01, Business activity, marketing and people. It covers buying, selling and adding value, spotting an opportunity and starting a business, entrepreneurs and intrapreneurs, risk, reward and uncertainty, business objectives: profit, growth, survival and sustainability, SMART objectives and the usefulness of objectives, primary, secondary and tertiary sectors, sole traders and partnerships, private and public limited companies, liability, legal status and choosing an ownership structure, social enterprises and not-for-profit organisations, the stakeholders of a business, what each stakeholder wants from a business, conflicting stakeholder objectives, measuring the size of a business, organic growth and franchising, mergers, takeovers, integration and diversification, factors influencing the scale of operations, economies and diseconomies of scale, market power and overtrading, stages of the customer journey and customer experience and how it is measured.
Where it is assessed
Component 01
Business activity, marketing and people.
Check the OCR specification ↗The 22 subtopics
Each one has its own page.
- Buying, selling and adding valueRecall questions on business activity and the transformation process, the difference between goods and services, calculating added value, the ways a business adds value and why added value differs from profit.Open →
- Spotting an opportunity and starting a businessRecall questions on spotting a gap in the market, generating and testing business ideas, invention and innovation, customer needs and wants, the purpose of a business plan and the barriers facing a new start-up.Open →
- Entrepreneurs and intrapreneursRecall questions on the entrepreneur and the intrapreneur, the functions and qualities of an entrepreneur, risk-bearing and opportunity cost, how businesses encourage intrapreneurship and its main drawback.Open →
- Risk, reward and uncertaintyRecall questions on the difference between risk and uncertainty, the risks and rewards of a new venture, calculated risk, how market research and limited liability reduce risk, and why many start-ups fail early.Open →
- Business objectives: profit, growth, survival and sustainabilityRecall questions on business objectives including profit, survival, growth, revenue, market share, cost control and sustainability, and why objectives change as a business matures or differ between rivals.Open →
- SMART objectives and the usefulness of objectivesRecall questions on SMART objectives, rewriting an aim as a SMART objective, the difference between an aim and an objective, how objectives coordinate and motivate, and their limitations.Open →
- Primary, secondary and tertiary sectorsRecall questions on the work of the primary, secondary and tertiary sectors, tracing a chain of production, deindustrialisation, how the sectors depend on one another and why primary producers face price swings.Open →
- Sole traders and partnershipsRecall questions on sole traders and partnerships, unlimited liability, the deed of partnership, limited liability partnerships, and the advantages, drawbacks and suitability of each structure.Open →
- Private and public limited companiesRecall questions on private and public limited companies, incorporation and the documents it requires, flotation on a stock exchange, the divorce of ownership and control, and the suitability of each structure.Open →
- Liability, legal status and choosing an ownership structureRecall questions on limited liability, incorporated and unincorporated businesses, continuity of existence, personal guarantees, and the control, tax and privacy factors in choosing a legal structure.Open →
- Social enterprises and not-for-profit organisationsRecall questions on not-for-profit organisations and social enterprises, the triple bottom line, asset locks, co-operatives, community interest companies, and the tension between social mission and commercial survival.Open →
- The stakeholders of a businessRecall questions on internal and external stakeholders, the main stakeholder groups from shareholders and lenders to government and suppliers, stakeholder mapping, and why stakeholders are identified before major decisions.Open →
- What each stakeholder wants from a businessRecall questions on the objectives of shareholders, employees, managers, lenders, customers, investors, government, local communities and suppliers, and why understanding them improves a business's decisions.Open →
- Conflicting stakeholder objectivesRecall questions on stakeholder conflict over pay, relocation, supplier prices, growth, dividends and environmental costs, the ways a business manages conflicting objectives and how the balance of power decides them.Open →
- Measuring the size of a businessRecall questions on measuring business size by revenue, market share, market capitalisation, capital employed, employees, outlets and floor space, with calculations and the weaknesses of each measure.Open →
- Organic growth and franchisingRecall questions on organic growth and its methods, advantages and pace, franchising from the franchisor's and franchisee's side, calculating a franchise royalty, and when organic growth suits better than acquisition.Open →
- Mergers, takeovers, integration and diversificationRecall questions on mergers and takeovers, hostile takeovers, horizontal and vertical integration, diversification, synergy, why takeovers fail and why competition authorities may block a merger.Open →
- Factors influencing the scale of operationsRecall questions on how the product, cost structure, customers, suppliers, technology and infrastructure influence a business's scale of operations, and the dangers of operating at too large or too small a scale.Open →
- Economies and diseconomies of scaleRecall questions on internal and external economies of scale, the purchasing, technical, managerial, financial and marketing types, diseconomies of scale and their causes, minimum efficient scale and the long-run average cost curve.Open →
- Market power and overtradingRecall questions on market power and how it affects suppliers, customers and new entrants, why competition authorities watch it, and the causes, warning signs, consequences and avoidance of overtrading.Open →
- Stages of the customer journeyRecall questions on the five stages of the customer journey from awareness to advocacy, customer retention, customer lifetime value, and why mapping the journey is useful even though it is rarely linear.Open →
- Customer experience and how it is measuredRecall questions on customer experience, speed and quality of service, staff product knowledge, after-sales service, personalisation, the Net Promoter Score and other ways of measuring customer experience.Open →
What you need to know
Answer each one before you reveal it.
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Why is understanding customer needs the starting point for any new business?
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Why is a lack of finance such a common barrier for a start-up?
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How can a rival's established brand act as a barrier to a new entrant?
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Why does market research reduce risk without ever removing it?
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Why does a business with high fixed costs carry more risk than one whose costs are mainly variable?
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Distinguish between a revenue objective and a profit objective.
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Why can a measurable objective sometimes distort behaviour?
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How do the three sectors depend on one another?
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Why are primary sector businesses particularly exposed to swings in price?
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How does a firm's sector shape the costs it faces?
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What does unlimited liability mean for a sole trader?
Evaluation
Give two disadvantages of forming a partnership.
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Why are professional firms such as solicitors and accountants often partnerships?
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Why does a private limited company find raising finance easier than a sole trader but harder than a plc?
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Why is choosing a legal structure a decision a business revisits rather than takes once?
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Why can stakeholder conflict never be removed entirely from a business?
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Why does growth matter to a business's long-term success?
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Why is failure less likely for a franchisee than for an independent start-up?
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How does the cost structure of an industry affect the scale a firm must reach?
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How do suppliers influence the scale at which a business can operate?
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Why is choosing too large a scale dangerous?
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Why does communication worsen as a business grows?
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What is meant by retention in the customer journey?
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Why has customer experience become more important to businesses?
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Why is speed of service alone not enough to give a good customer experience?
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Define the term entrepreneur.
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What is a not-for-profit organisation?
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Distinguish between an internal and an external stakeholder.
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State the main objectives of a business's shareholders.
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Name six ways the size of a business can be measured.
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State two benefits a business expects from horizontal integration.
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How can market power benefit a business's customers?
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What is meant by business activity?
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Define the term intrapreneur.
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What is a business objective?
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Why must an objective be specific?
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What is meant by incorporation?
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Distinguish between an incorporated and an unincorporated business.
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Define a social enterprise.
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Name six stakeholder groups of a supermarket chain.
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State three things customers want from a business.
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What is a stakeholder conflict?
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Define revenue and state how it is calculated.
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What is vertical integration?
Take Business Activity further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Added value vs Profit
Added value: the difference between the price a customer pays and the cost of the bought-in materials, components and services used to make the product. Profit: what remains once every cost, including wages, rent and overheads, has been taken off sales income.
Risk vs Uncertainty
Risk: an outcome whose likelihood can be estimated from evidence and planned for in advance. Uncertainty: an event to which no useful probability can be attached, so it cannot be measured or planned for at all.
Entrepreneur vs Intrapreneur
Entrepreneur: a person who spots a commercial opportunity, puts their own money at stake to exploit it and keeps the reward if it succeeds. Intrapreneur: an employee who develops new ideas inside an existing business using the employer's resources, and is paid a salary while the employer keeps the value created.
Questions from this topic
Each one with the model answer underneath.
- 1
What is meant by business activity?
Model answer
Business activity is the process of combining resources to buy in inputs, add value to them and sell the resulting goods or services to customers, normally with the aim of making a profit.
- 2
Define added value.
Model answer
Added value is the difference between the price a customer pays for a product and the cost of the bought-in materials, components and services used to produce it.
- 3
A furniture maker buys timber and fittings costing £120 per table and sells each table for £340. Calculate the value added per table.
Model answer
The value added is £220 per table, because £340 minus the £120 of bought-in materials leaves £220.
- 4
Distinguish between a good and a service.
Model answer
A good is a physical, tangible product the customer can own and store, while a service is an intangible act performed for the customer that cannot be stored or owned in the same way.
- 5
Why must most businesses buy before they can sell?
Model answer
Almost every business has to pay for materials, stock, labour or equipment before it has anything to sell, which is why a start-up needs finance in place well before its first sale.
- 6
How does a coffee shop add value to a bag of coffee beans?
Model answer
It roasts, grinds and brews the beans and serves the drink quickly, by trained staff and in a comfortable setting, so customers will pay far more per cup than the beans themselves cost.
What is inside Levo
Six ways to work the same material.
Business Activity revision questions
- What does Business Activity cover in OCR A-Level Business (H436)?
- 22 subtopics: buying, selling and adding value, spotting an opportunity and starting a business, entrepreneurs and intrapreneurs, risk, reward and uncertainty, business objectives: profit, growth, survival and sustainability, smart objectives and the usefulness of objectives, primary, secondary and tertiary sectors, sole traders and partnerships, private and public limited companies, liability, legal status and choosing an ownership structure, social enterprises and not-for-profit organisations, the stakeholders of a business, what each stakeholder wants from a business, conflicting stakeholder objectives, measuring the size of a business, organic growth and franchising, mergers, takeovers, integration and diversification, factors influencing the scale of operations, economies and diseconomies of scale, market power and overtrading, stages of the customer journey and customer experience and how it is measured. Each one has its own page with questions and model answers.
- How is Business Activity organised?
- By the OCR H436 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Business Activity, on a schedule.
Attempt a question from memory, write the correct version, then attempt it again. Levo records the jump between your first attempt and your last, and brings each question back on the day you are due to forget it.
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