Numbers
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
Operations
Added value and how it is calculated
- 3 things to know
- Component 02
Overview
Recall questions on added value and its formula, calculating it per unit and in total, and the ways a business raises it.
What you need to know
Answer each one before you reveal it.
Your recallNot started
Key term
A firm sells 1,200 units at £45 each and its bought-in costs are £27 a unit. What is its total added value?
Key term
Why is added value not the same thing as profit?
Questions from this subtopic
Each one with the model answer underneath.
- 1
Define added value.
Model answer
Added value is the difference between the price a business charges for a product and the cost of the bought-in materials and services used to produce it.
- 2
State the formula for added value.
Model answer
Added value = selling price − the cost of bought-in inputs.
- 3
A baker sells a sourdough loaf for £3.20 and the flour, yeast and packaging bought in for it cost £0.85. What is the added value per loaf?
Model answer
The added value is £3.20 − £0.85 = £2.35 per loaf.
- 4
A furniture maker buys timber and fittings costing £180 for each table and sells the table for £450. What is the added value as a percentage of the selling price?
Model answer
Added value is £450 − £180 = £270, which is £270 ÷ £450 × 100 = 60% of the selling price.
- 5
A firm sells 1,200 units at £45 each and its bought-in costs are £27 a unit. What is its total added value?
Model answer
Added value is £45 − £27 = £18 per unit, so total added value is 1,200 × £18 = £21,600.
- 6
Why is added value not the same thing as profit?
Model answer
Wages, energy, rent and other overheads still have to be paid out of added value, so profit is only what is left once those costs are met.
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