Final Revision – Unit 1
You MUST know ALL of the
keywords – you can then attempt
EVERY question!
Student Common Area
AQA Revision Guide
VLE
Exercise Books
AQA work books
Unit 1 – setting up a business
Chapter
Starting a Business
1.1
Why start a business? Social enterprise (definitions/pros/cons)
1.2
Gaps in the market, Market observation and market mapping
1.3
Franchises (definition, advantages and disadvantages)
1.4/1.5
Business objectives (examples) and measuring success
1.6
Business objectives and stakeholders (examples)
1.7
Business plans (contents and uses)
1.8
Risk and uncertainty (examples, how to minimise risks)
1.9
Legal Structures - Sole traders and partnerships (definitions, pros, cons)
1.10
Limited companies and limited/unlimited liability (definition, pros, cons)
1.11
Location (why?) and the internet as an option
Unit 1 – setting up a business
Chapter
Marketing
2.1
Market research with limited budgets (benefits of MR, types)
2.2
Market research methods – internet, phone survey, questionnaire, supplier
feedback, customer feedback, focus group (pros and cons)
2.3
The marketing mix (why?), links between 4 aspects, image
2.4
Product – product range for small firms
2.5
Price – decisions and demand
2.6
Promotion – advertising, free publicity, word of mouth, direct mail, personal
selling, website, banners (pros and cons)
2.7
Place – channels of distribution, e commerce
Marketing on a small budget
Market Research
The 4 Ps
Primary research
Price
Secondary research
Place
Research on a budget
Promotion
Product
Make sure your strategies are right for
the business in the question!
Unit 1 – setting up a business
Chapter
Finance
3.1
Finance and support for small businesses – bank loan, loan from family and
friends, overdrafts, mortgage, trade credit, grants – pros and cons,
availability, short or long term (when to use different sources)
3.2
Financial terms and basic calculations – revenue/costs/profit or loss
3.3
Cash flow and survival – cash flow forecast and calculations, uses and
importance
3.4
Using cash flow forecasts – interpreting results and identifying solutions
Sources of Finance
•
•
•
•
•
What for?
Internal or external?
Long term or short term?
Repayment costs?
Availability of finance?
• Important: Knowing enough advantages and
disadvantages so that you can make the
right choice!
Cash flow
• Is enough cash coming into the business to allow
us to pay the bills?
• What to look for:
Negative closing balances, large expenditures
causing problems, seasonal changes.
• Possible Solutions:
CUT COSTS - Overdraft, short term loan, delay
payments, lease rather than buy, trade credit
extended.
RAISE REVENUE – Sales, chase debtors.
Unit 1 – setting up a business
Chapter
People in Business
4.1
Recruitment – when to recruit, full or part time, recruitment methods (job
description, person specification, advertisement, shortlisting, interviews)
4.2
Rewarding employees – Deciding how much to pay employees, attracting
and keeping the best employees (monetary and non monetary rewards)
4.3
Motivating staff – why? Monetary techniques, (commission, bonuses) non
monetary techniques (training, responsibility) – pros and cons
4.4
Protecting staff through legislation – equal pay act, minimum wage act,
discrimination laws, employment rights, health and safety act
Unit 1 – setting up a business
Chapter
Operations Management
5.1
Production Methods – job and batch production (pros and cons)
5.2
Operational efficiency – advantages and ways to be more efficient
5.3
Production and technology – robots/ computerised stock control programs/
communications technology/ design technology (CAD)
5.4/
Production and quality – why? Advantages of quality, how can quality be
achieved?
5.5
Customer Service – Reliability/pre-sales service, service at time of purchase,
after sales service, benefits
5.6
Consumer protection – Sale of goods act, consumer protection act,
competition act – pros and cons of laws for a business
5.7
Impact of ICT on customer service – pros and cons of internet to customers
and the business, ecommerce and global markets
Operations Management
• Job or batch production – which fits best???
Exam Technique
• Read the question twice
• Underline key points and build a little mental
picture of the business
• Answer for the business in the question when
prompted
• Read each question carefully!
• Expect the unexpected – and don’t panic. If
your finding a question tricky, everyone in the
country probably is!
Exam Technique (AO1)
• List, state or give – short answers
• Describe – need one point and a
development point (or example) if
for two marks
Exam Technique (AO2)
•
•
•
•
4-6 Marks
Command Words: Explain; Calculate
Application crucial
Problem - Need to read THE WHOLE
QUESTION
• Example 1c: Identify two methods of
market research and explain how each
method might help Jenny make the
business be more successful
Exam Technique – AO3
9 mark questions
• Analyse by comparing with alternative options
or accepting the disadvantages/weaknesses of
your choice. Consider what will happen if….
• Make a clear recommendation and give reasons
for your choice – why is it right in this situation.
Don’t just repeat your analysis.
• Use the data in the case study and make sure
your answer is about this business.
Analysis and Evaluation
Analysis can include: Evaluation:
Advantages and
disadvantages.
Why is your choice right for
this business.
Comparison of differing
options.
Justifying your choice.
Short run or long run
impact.
Consideration of impact on
the business.
Make sure it’s analysis – you could
•
•
•
•
•
•
•
•
•
Compare options
Apply theory to this situation
Bring in current market/economic knowledge
Consider the likelihood of success
What are the likely short term and long term
impacts
What impact will there be on costs/customers/
sales/profits/competitors/stakeholders
Link two separate points together
Make calculations based on data given
Consider a what-if scenario
Recommendation
• Make a decision and give the reasons for your
choice (without repeating a previous point!)
• Be consistent throughout your answer.
• Make sure you look to give at least two reasons
for your choice (which might include a reason for
rejecting the another option)
• You might try and point out how you would
overcome a potential problem with your choice.
• Use the case study!
(6 marks)
STS will benefit from using e-commerce because
it will allow them to expand their services and
attract business from companies all over Europe.
STS’s main strength is that both Magdi and
Dimitri speak numerous languages and they can
use the internet to advertise their services
internationally, receive and return documents by
email and make all billing through paypal. Ecommerce is the best way to market a business
internationally and is much cheaper than
advertising in different business magazines
across Europe.
• Ultimately, if in doubt just answer the
question!
• The next answer has the decision upfront,
but still includes analysis and a reason for
the decision!
I recommend that STS address the short term cash flow problem
in September, October and November by seeing if they can get
the web designer to offer them trade credit on the new website.
This would allow STS to have the website straight away, but pay
for it in December when their cash situation has recovered (E1 –
2). If the website payment was delayed for 90 days, their negative
closing balance in October would be reduced to £200 and a small
overdraft would cover this and the interest to be paid to the bank
would be minimised. This is definitely the cheapest solution for
STS (L3 – 3).
(5 marks)
But there must be a decision!
To analyse, one way in which STS can address the short term cash flow
problem in September, October and November by seeing if they can get the web
designer to offer them trade credit on the new website. This would allow STS to
have the website straight away, but pay for it in December when their cash
situation has recovered. If the website payment was delayed for 90 days, their
negative closing balance in October would be reduced to £200 and a small
overdraft would cover this and the interest to be paid to the bank would be
minimised. (L3 – 3)
To conclude, I recommend trying to get trade credit on the website. This is
because there will be no interest charged and it will mean they can use the
website now to generate sales. (E1 – 2)
To analyse, one way in which STS can address the short term cash flow
problem in September, October and November by seeing if they can get the web
designer to offer them trade credit on the new website. This would allow STS to
have the website straight away, but pay for it in December when their cash
situation has recovered. If the website payment was delayed for 90 days, their
negative closing balance in October would be reduced to £200 and a small
overdraft would cover this and the interest to be paid to the bank would be
minimised. This is definitely the cheapest solution for STS. The problem with
asking the web designer for trade credit is that he may say no. In this situation,
STS would need to either increase the size of their overdraft to £2 200 or
consider delaying the new website – neither of which are ideal, so hopefully they
will get 90 days trade credit from the designer. (L3 – 4)
To conclude, I recommend trying to get trade credit on the website. This is
because there will be no interest charged and it will mean they can use the
website now to generate sales. (E1 – 2)
To analyse, one way in which STS can address the short term cash flow
problem in September, October and November by seeing if they can get the web
designer to offer them trade credit on the new website. This would allow STS to
have the website straight away, but pay for it in December when their cash
situation has recovered. If the website payment was delayed for 90 days, their
negative closing balance in October would be reduced to £200 and a small
overdraft would cover this and the interest to be paid to the bank would be
minimised. This is definitely the cheapest solution for STS. The problem with
asking the web designer for trade credit is that he may say no. In this situation,
STS would need to either increase the size of their overdraft to £2 200 or
consider delaying the new website – neither of which are ideal, so hopefully they
will get 90 days trade credit from the designer. (L3 – 4)
To conclude, I recommend trying to get trade credit on the website. This is
because there will be no interest charged and it will mean they can use the
website now to generate sales. (E1 – 2) Encouraging their customers to pay
earlier might be the best long term solution to their cash flow problems, but, this
is probably not the best way to deal with their current problems because it will
take too long to persuade their customers to pay up what they owe. (E2 – 4)
Final Revision – Unit 2
You MUST know ALL of the
keywords – you can then attempt
EVERY question!
Student Common Area
AQA Revision Guide
VLE
Exercise Books
AQA work books
Unit 2 – growing as a business
Chapter
The Business Organisation
6.1
Expanding a business – reasons for growth, benefits and risks, reasons for
not expanding
6.2
Methods of expansion – organic, inorganic, franchises – pros and cons
6.3
Conflict between stakeholders – benefits and drawbacks of expansion to
different groups, ways they protect their interests
6.4
Choosing the right legal structure – private limited and public limited
companies – pros and cons
6.5
Changing aims and objectives – examples and explanation of where
appropriate
6.6
Social costs and benefits – ethics and the environment – why? How being
ethical can reduce short term profit and increase long term profit
6.7
Location – factors to consider and features of an ideal location
6.8
Global location – benefits and problems of locating abroad
Unit 6
Benefits of expanding
Reasons not to expand
Conflict between stakeholders
Unit 2 – growing as a business
Chapter
Marketing
7.1
Product – product portfolio benefits, product life cycle (diagram and stages),
extension strategies – how can these impact on other departments?
7.2
Price – factors that affect pricing, pricing strategies and appropriateness
7.3
Promotion – factors affecting the choice of promotion, promotion types for
growing businesses (pros and cons)
7.4
Place – channels of distribution (producer-retailer-consumer, producerwholesaler-retailer-consumer, telesales, mail order, internet selling)
Unit 7 - Marketing
Product
Price
Promotion
Place
Product
Portfolio
How much
Advertising
competition?
Producerretailerconsumer
Product Life
Cycle
Price
skimming
Sales
promotions
Producerwholesalerretailer-consumer
Extension
Strategies
Price
penetration
Directing
marketing
Telesales
Cost-plus
pricing
Sponsorship Mail order
Loss leader
Cost v
Impact
Internet
selling
Unit 2 – growing as a business
Chapter
Finance
8.1
Finance for large businesses – retained profit, selling unwanted assets, new
share issue, loan, mortgage, sale and leaseback – pros and cons. Which is
best?
8.2
Profit and loss accounts – purpose, what is included, calculations, gross and
net profit and profit margins, interpreting the figures
Balance sheets – purpose, what is included, calculations, current and acid
test ratios, interpreting the figures
Sources of Finance
•
•
•
•
•
What for?
Internal or external?
Long term or short term?
Repayment costs?
Availability of finance?
• Important: Knowing enough advantages and
disadvantages so that you can make the
right choice!
Profit and Loss
• Key words – revenue, cost of sales, gross profit, overheads, net profit.
• Understanding the format – what goes where?
Sales revenue – cost of materials = gross profit
Gross profit – all overheads = net profit
• Calculating gross profit margin and net profit margin
Gross profit margin – the percentage of sales revenue that is gross profit
Net profit margin – the percentage of sales revenue that is net profit
• Is profitability improving (our ability to make profit over a period of
time)? Is it better than our competitors?
• What can we do if it is not good enough? LOOK FOR KEY FIGURES
Balance Sheets
• What is our business worth (net assets) and is it
solvent (can we pay the bills? – net current
assets)
• Ratio analysis – current ratio and acid test ratio –
understand the results….
• Current ratio = How many £ assets to each £
liabilities? – 1.5 ideal (1 is risky, 2 is too high!)
• Acid test ratio = Same as above except stock is
taken from assets – A MORE REALISTIC
PICTURE – 1 is fine!
Finance
Sources of
Finance
Profit and Loss
Account
Balance Sheet
Retained profit
Sales revenue
Assets
Selling unwanted Gross profit or net Liabilities
assets
profit
Sale and Lease
back
Gross profit
margin
Liquidity
New share issue
Net profit margin
Current ratio
Loan or mortgage Profitability
Acid test ratio
Unit 2 – growing as a business
Chapter
People in Business
9.1
Organisation structures – Benefits of structure, tall and flat structures and
wide and narrow spans of control, centralisation and decentralisation
9.2
Recruitment – 4 stage process (job analysis, job description, person
specification, internal or external recruitment) – how to select new workers
9.3
Training and appraisal – benefits of training, induction, on the job, off the job
(pros and cons)
Appraisal – definition and benefits
9.4
Motivating and retaining staff – benefits of motivated workers, styles of
management (autocratic and democratic) , methods of pay (remuneration) –
piece rate pay, hourly wage, salary, profit sharing (pros and cons)
Human resources
• Organisational charts
• Line managers, spans of control, flat and tall
structures, delegation, motivation, chain of
command
• Decentralisation or centralisation
Recruitment of
staff
Staff training
Motivating and
retaining staff
Job analysis
Induction training Benefits of
motivating staff
Job description
On-the-job and
off-the-job
Staff training
Person
specification
Appraisal
Autocratic or
democratic
Application form,
interview, testing.
Piece rate, salary,
profit sharing
Internal or
external
Bonus or
commission
Unit 2 – growing as a business
Chapter
Operations Management
10.1
Production methods for growing businesses – FLOW production (key
features, advantages and limitations)
Lean production – Kaizen, Just in time, Lean design, Cell production
(definitions, pros and cons)
10.2
Recognising challenges of growth – benefits of growth, main economies of
scales (bulk buying, technical economies, specialist managers, financial
economies), possible disadvantages of growth (poor communication, poor
motivation, poor coordination)
10.3
Quality assurance in growing businesses – main causes of quality problems
(poorly motivated workers, no clear responsibility, lack of consistency,
outsourcing, inspection costs), main methods of maintaining quality (setting
agreed standards (examples), total quality management TQM – features)
Operations Management
• Flow Production and reducing cost per units
• Lean production, Kaizen, JIT, Lean design, cell
production
Challenges of
growth
Economies of scale
Diseconomies of
scale
Buying in bulk
Poor communication
Managerial economies
Poor motivation
Technical economies
Poor coordination
Financial economies
All lower the cost per unit…
Quality
Assurance
Causes of Poor Quality
Maintaining
quality
Poor motivation
Agreed
standards
Total quality
management
No clear responsibility
Outsourcing
Inspection costs
Exam Technique
• Read the question twice
• Underline key points and build a little mental
picture of the business
• Answer for the business in the question when
prompted
• Read each question carefully!
• Expect the unexpected – and don’t panic. If
your finding a question tricky, everyone in the
country probably is!
Exam Technique (AO1)
• List, state or give – short answers
• Describe – need one point and a
development point (or example) if
for two marks
Exam Technique (AO2)
•
•
•
•
4-6 Marks
Command Words: Explain; Calculate
Application crucial
Problem - Need to read THE WHOLE
QUESTION
• Example 1c: Identify two methods of
market research and explain how each
method might help Jenny make the
business be more successful
Exam Technique – AO3
9 mark questions
• Analyse by comparing with alternative options
or accepting the disadvantages/weaknesses of
your choice. Consider what will happen if….
• Make a clear recommendation and give reasons
for your choice – why is it right in this situation.
Don’t just repeat your analysis.
• Use the data in the case study and make sure
your answer is about this business.
Analysis and Evaluation
Analysis can include: Evaluation:
Advantages and
disadvantages.
Why is your choice right for
this business.
Comparison of differing
options.
Justifying your choice.
Short run or long run
impact.
Consideration of impact on
the business.
Make sure it’s analysis – you could
•
•
•
•
•
•
•
•
•
Compare options
Apply theory to this situation
Bring in current market/economic knowledge
Consider the likelihood of success
What are the likely short term and long term
impacts
What impact will there be on costs/customers/
sales/profits/competitors/stakeholders
Link two separate points together
Make calculations based on data given
Consider a what-if scenario
Recommendation
• Make a decision and give the reasons for your
choice (without repeating a previous point!)
• Be consistent throughout your answer.
• Make sure you look to give at least two reasons
for your choice (which might include a reason for
rejecting the another option)
• You might try and point out how you would
overcome a potential problem with your choice.
• Use the case study!
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