AQA AS Business Studies (5131) The following pages are designed to help teachers and students as they prepare for the Unit 2 and 3 AQA examinations. The pages have been put together by practising teachers and examiners who are currently delivering the course. The pages are not an exhaustive guide but do offer an excellent insight into key topic areas relevant to the forthcoming examinations. It is highly recommended that students make use of the web links to the Times 100 website (www.tt100.biz) as this will offer excellent analytical material and background reading of relevant core topic areas, which is a distinct recommendation of chief examiners. (Page references quoted relate to The Times 100 edition 11) As a reminder. 28% of the marks are for case study application (application marks) 28% of the marks are for knowledge (content marks) 24% of the marks are for analysis (analysis marks) Evaluation is worth the least marks but will be required Unit 1 Unit 2 Unit 3 Knowledge 33% 28% 28% Application 33% 28% 28% Analysis 24% 24% 24% Evaluation 10% 20% 20% Total 100% 100% 100% Knowledge This is shown through precise, short definitions at the very start of your answer. This should be about the topic given in the question. An example: Explain two possible benefits that XYZ Ltd might have gained from adopting simultaneous engineering. ‘Simultaneous engineering is doing two or more parts of a project at the same time so that the whole thing is completed more quickly.’ Application This is about relating your answers to the scenario. This is not just using names. You really need to use facts and figures about the business, its’ product and its’ market. To begin to deconstruct the scenario look at it at 3 levels: The business itself (is it large, small, financially strong, strong product portfolio?) The product (is it price elastic, is it of high quality, what is its USP?) The market (is it a seasonal product, how is the stock controlled, is it growing, stable, national, international?) How to apply Read the text carefully Identify a few points that distinguish this particular business Use these points in developing your answers Don’t just rely on names of people and the business (as a general rule, if you can cover up S4U in your answer and apply the name of any business, you have not used application properly) E.g. Tesco Refer to scale – UK’s biggest retailer They have a growth target They are expanding overseas in various ways Have 30% of the market and is on the verge on being investigated by the Competition Commission Because of this they are now expanding internationally Analysis Analysis is building your argument using theory – this suggests you should use big, chunky paragraphs. Analysis would not come through in a short paragraph; this is an indication to the examiner that you may not have fully analysed the scenario. To help support this area there are a number of links to Times 100 case studies, which show the theory in operation with real businesses. Examiners encourage students to make such comparisons and award marks for those who do so. Ensure you follow the links and gain a wider understanding of key topic areas. Evaluation This is about weighing up evidence to reach a judgement. This is a skill that must be practiced and cannot be done by stock sentences You are being asked to evaluate when the command word in the question is any of: o Discuss… o To what extent… o Evaluate… (obviously) In both papers, there will be 2 evaluative questions, both 15 marks so be prepared for them BUT! Don’t give evaluation when you’ve not been asked to – it’s just not worth wasting the time. How to evaluate: In a 15 mark question when analysis and evaluation is required, use an approach of 3 big paragraphs, e.g. one paragraph one side of the argument (i.e. for cell production at S4U), one paragraph the other side of the argument (i.e. against cell production at S4U) and the final paragraph to evaluate and make a judgement. To make a judgement decide on the stronger of the two arguments, e.g. maintaining or reducing prices, and support your judgement using ‘because…’. This is a key way to show the examiner you are evaluating Judgement can come from identifying the most important of several factors to S4U. The requirements of the 15 mark questions: o Identify the relevant factors and develop 2/3 points well o Retain a clear focus on the context of the case o Provide in depth analysis of the factors you have identified o Give a judgement based on the arguments that have made and that answer the question Tips for structure: Start every answer with a definition of the topic being assessed e.g. economies of scale, motivation, etc. 2 marks are available for a good definition. Definitions should be short and precise and should only be one sentence. Don’t make them too wordy. Don’t rewrite the question - just get on with answering the question – remember time is of the essence: one mark per minute. Your answers are rewarded for quality not quantity. This means you should write 2 or 3 things in detail, e.g. two advantages of break even. Make sure your answer is relevant to the question being asked. If it’s not you are wasting time and not earning marks. After each paragraph, reread the question to check you are addressing the question properly. A short, more focused answer is far better than a long and vague answer. One good argument is better than two weak ones – this is the Golden Rule! Think ‘Why’ after you write each sentence to further advance your argument. ‘Economies of scale are advantages that businesses can benefit from operating on a large scale.’ WHY? Advantages lead to a reduction to average or unit costs, achieving optimum production.’ Be selective in your use of theory o Don’t write everything you know about a subject, theory must be relevant to the question o In big mark questions, you can relate any other topics in the specification that you feel are relevant, e.g. objectives and strategy and people/motivation If you make a judgement support it. ‘I think S4U should take the contract.’ WHY? Analyse two reasons why this firm uses JIT – ‘JIT is good for the firm because it reduces the need for working capital.’ WHY? ‘This is because capital that would have been invested in stock is now made available.’ Examine causes, consequences and relationships. Revision advice: Cover every part of the specification Start with making sure you know definitions for the terms within it – this is for every area: People in Organisations, Operations Management, External Influences and Objectives & Strategy Do this by using the spec or using the case. This will help you to get to know the case study even better. Sort the terms into the four topic areas. Make sure you know the relevance of each term to the case. Use past papers from the AQA website. You should choose questions but use them in the context of the S4U case study. About the exam: Only 60 minutes, 53 marks – one mark per minute, 5 minutes for reading. Be confident, stick to time management, you don’t want to run out of time on a big mark question towards the end of the exam Use the rest of the time for reading and thinking. Take this time to think before you write; this will lead to better, more focused answers. How much you write in the exam is not important, but quality is. The pre-issued case study – S4U In your revision: o Don’t just look for questions in the case study o Don’t just skim read it o Approach it from different angles, for different reasons, e.g. SWOT, a timeline, key important events, quotes, etc. o Have a specific aim each time you approach the case study S4U is basically split into 3 parts o Establishing the business o Running the growing business – here there are lots of issues to deal with, e.g. production techniques, change of location, training, etc. o Expanding the business The topics are introduced in paragraphs, it is important to use the data and link it to the theory. Know the case study and know the specification in relation to the case. There are three styles of question: 1) Explain/outline 2) Analysis 3) Evaluate (these will be the 15 marks questions) All questions have application marks. Key features of S4U o The product o Sports footwear o Specialist for athletes o Patented technology – scanner (important to Billy and Michelle establishing their product in a highly competitive market o Product is individually needed – this has implications for quality control o Later in the case – custom made sports footwear for children o The industry o Highly competitive (don’t just say this, talk about who the competition is, e.g. Nike, Reebok, Adidas, etc. These businesses are multinationals, huge budgets, marketing budgets, specialists, legal experts, etc. o S4U’s competitors are established brand names, their target market is the brand conscious, who like trainers for fashion items rather than functionality o The characters o An ex footballer and physiotherapist o Their contacts: Michelle has useful clients and Billy may know prestigious sports people o Sports and physio knowledge versus business knowledge o Capital investment 75:25 (implications for a power struggle? How often do we hear of Michelle after the business is set up? Billy makes lots of key decisions) o The workforce o Initially they are demotivated – considering Billy and Michelle’s new approach, how will this workforce respond? Will they turn it around? o Expand quite quickly through the case o Their experience can be questioned in view of quality and unique products o The changing objectives Firstly to break even and customer care: this implies that they will need high quality, keep costs low and keep their staff motivated Later in the case they set SMART objectives, e.g. 25% turnover/growth, 3 new products, 2-5% market share. This is a better approach to S4U’s objectives but really quite challenging. Will following the decisions Billy and Michelle contribute towards the achievement of these objectives? Define every term, keep definitions precise and to the point. This will show knowledge and content straight away. This stops you from rewriting the question – the examiners want to read your answer, don’t waste time and marks. Then – think about why this term is relevant to the case. Explain how it is used. E.g. what is a matrix structure and why is it important to S4U? Finally – know advantages and disadvantages of the concept where appropriate. This is an important analytical skill. For example: The advantages of a matrix structure to S4U: o There’s an appointed project manager o There is informed decision making from every perspective in the business o It’s good for staff motivation and this is good for productivity The disadvantages of a matrix structure to S4U: o It’s time consuming to set up the group and then to make a decision o There is an opportunity cost involved (it’s important to know this term well and use it) o People can be confused because they have two managers in different cases Applied to S4U: Organisation structure: will the workforce cope with this structure in a linear format? Will they welcome the attention (Mayo)? There are 3 tables of data Table 1: UK Consumer Spending on Sports Clothing (understand Index numbers) Table 2: Monthly production costs Table 3: Economic data: mid-year forecasts for the UK economy (Spring 2005) - Forecast to 2008 - Question its’ accuracy – who made the estimations? - Percentage change is an important calculation that you should use - It shows how significant the change is In general: read the data and think about what it is showing you for S4U. Know your key terms, e.g. interest rate, inflation, exchange rates, etc. Economic data: Remember the definition; cost of borrowing/reward for saving In the case it is currently 2.5% predicted to rise to 5.25% S4U have a £4m bank loan Why is the rise in interest rate significant? 1) S4U export to the French retailer (page 7, last paragraph). Euros to the £ is significant because from 2005 – 2008 trainers rise in price from €81 to €96. This make S4U significantly less competitive abroad – are they losing sales or can it maintain current levels of demand (will they continue to sell in this niche market? How price elastic is demand for the trainers?) Unit 2: Operations Management These are generally the less well answered questions – make sure you revise it well. Don’t ignore this area in your revision, even if you think you know it well. Operations Management is: ‘The way in which organisations use inputs and manage business processes efficiently to satisfy customer needs.’ There are three areas of the specification you need to use in your revision: o Productive efficiency Theory link http://www.thetimes100.co.uk/theory/theory.php?tID=255 web only o Controlling operations o Lean production Theory link http://www.thetimes100.co.uk/theory/theory.php?tID=252 web only Operations Management can be assessed by a 15 mark question. In this type of question, you are being invited to bring in any other relevant theory from this area, or other areas from the specification. Hint? One of these topics will form a 15 mark question. Productive efficiency: Economies of scale o Technical, specialisation, financial, purchasing o When explaining economies of scale with a definition, explain that they lead to a fall in average/unit costs: this will demonstrate more knowledge. Theory link http://www.thetimes100.co.uk/theory/theory.php?tID=212 web only External economies of scale o Small firms can take advantage of being part of a larger infrastructure, e.g. suppliers, training, etc. Diseconomies of scale o Are all about how growth is managed within the firm, e.g. more students in the lesson o Don’t forget! They lead to a rise in average/unit costs and tend to be harder to measure or quantify. The difficulty for a firm is finding their optimum level i.e. the level of output where the firm hits productive efficiency (see Table 2: Monthly Production Costs – this would be good to plot on a graph and examine in relation to S4U) Optimum level/productive efficiency is the point at which unit cost is at its lowest i.e. before diseconomies take effect. Work out the difference in percentages of the unit costs. Controlling Operations: Quality control This area should be linked to: o Production methods o Culture o Corporate objectives Continuous improvement link: http://www.thetimes100.co.uk/case_study.php?cID=56&csID=220 Binder Link – page 61 Self checking: advantages Inspection: advantages Sense of ownership Safety net Reduced waste Specific job/responsibility Better quality Holistic view (someone with sole responsibility of quality may spot common mistakes makes regularly and feedback so that the production process can be modified) As with any area: consider is quality important to S4U? The answer in this case is YES. It is so important to the unique trainer that Billy and Michelle produce. Quality link http://www.thetimes100.co.uk/case_study.php?cID=53&csID=214 Binder link – page 50 Lean production: Cell production o Each cell links to the one before and to the one after o It’s important that you recognise that you treat each cell as a customer and a supplier o Each cell is a self-contained unit responsible for its own self checking o Each cell is responsible for a whole product or a specific part of one o 2 key focuses of cell production are empowerment and quality (can also refer to kaizen here No area of Operations Management stands in isolation; it is connected to other topics in the spec. Chain of production link http://www.thetimes100.co.uk/case_study.php?cID=7&csID=231 Binder link – page 113 Unit 2: Leadership and Motivation What is motivation? You should define this as a starting point; it’s a desire to work, to do well, etc. It’s the cause of people’s actions – why people behave as they do. Know the difference between motivation and movement. Billy and Michelle will be interested in how they can make their workforce want to work. The way that people are motivated is influenced by: o Their personal qualities and background o The actions of others in the business, including managers The importance of staff motivation: o Recruitment and training costs o Retention o Productivity Recruitment and retention link http://www.thetimes100.co.uk/case_study.php?cID=66&csID=212 Binder link -Page 29 You can build a line of argument: E.g. retention of staff can lead to a greater sense of team spirit at S4U. This relates to Maslow’s hierarchy of needs (safety and social needs). This means that less training is needed, which saves money, this adds to profit…). In the exam don’t spend a long time describing a theory, e.g. with Maslow draw the hierarchy or just bullet point it. McGregor: The workforce was used to Theory Y Managers – will they be able to cope with this new approach? How will staff adapt to this new style of management? How will this approach be maintained as the organisation grows? How will the workforce adapt to a matrix structure for project work (talk of meetings – page 3/paragraph 6 – suggests a democratic approach which shares objectives. Regular team meetings will support this approach. Management Style Link http://www.thetimes100.co.uk/case_study.php?cID=66&csID=174&pID=3 Binder link - page 30 Unit 3: External Influences Exchange rates Interest rates Inflation In general: Consider the possible impact of a change in this variable on the business, e.g. a change in the value of the £ Think about the general direction of the change – e.g. is it stronger or weaker, will it buy less or more abroad? Consider in the context of the business, especially if it’s an importer or exporter Think about the size of the change (percentage change?) Consider how important it is it to the business internationally e.g. do they lose demand abroad? Do they lose a small percentage? Is there little impact? Reflect on the context of the case study. Business cycle and the effect of interest rates and inflation link: http://www.thetimes100.co.uk/case_study.php?cID=60&csID=229 Binder link – Page 97 A change in the exchange rate: May affect the profitability of the business – don’t say ‘It will…’, say ‘It might…’ or ‘It’s likely…’ because the effects of the change depend on many variables May affect the business’ competitiveness abroad – may because it depends on the price of the product, its’ price, quality, uniqueness, etc. How might a business reach to changes in the exchange rate? It can: 1) Absorb the increase in costs (or profit) 2) Increase or decrease the price 3) Pass on the price saving to customers A change in the interest rate: Can affect the business directly o By the cost of borrowing changing, e.g. variable interest rate on the £4m loan o By the repayment of existing loans Can affect the business indirectly o Consumer demand may change e.g. interest rates have remain unchanged for a while, are they due a change? o If they go up, consumers may change their pattern of expenditure, cutting back on non-essential items and looking for cheaper substitutes. Are all businesses affected to the same extent? o It can depend on the action taken in response to a change in the interest rate o It can depend on the nature of the product, other businesses may benefit from the change and luxury goods may feel the impact more DON’T FORGET to refer to price elasticity of demand Income elasticity of demand may also be relevant It is key to use basic facts and think in context and make a judgement when needed. Also consider the wider external influences such as a PEST analysis might raise. Link to the impact that external influences has in driving change: http://www.thetimes100.co.uk/case_study.php?cID=35&csID=34&pID=4 (web only) Unit 3: Corporate Objectives of S4U Question in this area primarily focus on the Unit 3 content, but you should be prepared to introduce ideas form Unit 1 and Unit 2 to your answer. Common business objectives are: o Profit maximisation o Growth o Market domination o Brand leadership o Survival o Diversification Link to analysis of aims and objectives: http://www.thetimes100.co.uk/case_study.php?cID=73&csID=243 Binder link – page 105 E.g. Growth is a key objective of most businesses but has lots of implications for the other functions of the business, e.g. HR, Finance, Operations Management, Marketing, etc. Business growth link: http://www.thetimes100.co.uk/case_study.php?cID=88&csID=233&pID=2 Binder Link – Page 105 Consider how objectives change over time, the initial objective of S4U is survival. Long-term there are other aims for S4U. Unit 3 may be an evaluative question for 15 marks – consider the time scale e.g. long-term objectives versus short-term objectives. Also consider what pressures Billy and Michelle have when setting the business objectives. They are not set without lots of thought, think of all the stakeholder groups that have an interest in the business and who will be affected by the objectives and changing objectives of the business. Will specific groups but pressure on Billy and Michelle about the prime objective? E.g. employees may want profit maximisation so they know that their jobs are secure. In a stakeholder question – limit the number of ideas you develop, e.g. don’t discuss: o Owners o Managers o Employees o Finance providers o Customers o Suppliers o Local community o Shareholders Stakeholder links: http://www.thetimes100.co.uk/case_study.php?cID=15&csID=195&pID=2 (web only ed 10) http://www.thetimes100.co.uk/case_study.php?cID=78&csID=216 Binder link – page 34 Be selective with which stakeholders you choose to discuss, if not you’ll run out of time. In your revision though think through all stakeholder groups and consider their impact on the business and the businesses impact on them. Consider what’s in it for the different groups. E.g. are they all happy with growth as a primary objective? Consider the importance of each objective to each stakeholder group. What are their priorities (Profit? Survival? Market domination?)? Can S4U afford to ignore the wishes of a group of stakeholders? In an evaluative answer you must consider this – what will happen if they do? E.g. the finance providers won’t lend Billy and Michelle any more money; employees will leave or do the minimum amount of work (important to quality). This part of the spec depends of the leadership style used and what motivates the workers of S4U. A key concept to focus on throughout this area is cause and effect what might bring about change and what affect will that change have on the business and its stakeholders.