AQA BUSS4 REVISION POSTERS

An analysis of Apple Inc:

An analysis of BAE Systems:

An analysis of Nissan Sunderland:

 

 

An analysis of Dyson:

 

 

 

An analysis of GlaxoSmithKline:

 

An analysis of JCB:

An analysis of Jaguar Land Rover:

An analysis of Rolls-Royce:

An analysis of Samsung:

An analysis of Warburtons:

Important theorists and ideas for analysis:

This years (2015) research topic is manufacturing in the UK. Here is a look at the factors surrounding location (Research bullet point 4):

Here is a look at the opportunities and threats for UK manufacturers (Research bullet point 5):

Recommended Revision Websites/Videos

1.

The first website I recommend is linked below and can be used for both AS and A2 Business Studies.

I love how all the chapters and units are organised into folders and in each chapter it provides:
- The specification of what you need to know
- Theory (in the form of a PDF which you can print)
- It has activities/worksheets with questions, so you can practice what you had learnt from the theory.
- It has additional reading on the topic which can help improve your understanding and knowledge of the theory.
- Finally, it has revision notes which you can add to your own class notes and print off.

Check this website out, it is a difficult one to find on the internet and is a real gem! :)

http://www.holyfamily.ngfl.ac.uk/minisites/a-levelbusiness/

2.

This is an excellent website which can be used for GCSE and A-level.

http://www.businessstudiesonline.co.uk/live/

3.

The Student Room is a forum for all students, which is open for you to read and you can join it if you want to participate and ask questions. I used this website a lot during my exams, and even after my exams to see what people thought of the test. If you also want to discuss careers in business or doing a degree in it, this site is great.

http://www.thestudentroom.co.uk/forumdisplay.php?f=111

4.

Want some model answers to questions? This is the place!! Print them off and learn how to get full marks in your AS Business Exam.

http://www.hodderplus.co.uk/ocrbusiness/

5.

If you want to revise critical path analysis or you need it to be explained to you again, you are sure to understand it after watching this video! I also recommend you check out more of this youtuber's videos as they are really helpful and good.

https://www.youtube.com/watch?v=-EqWGSdQSvI&list=PLBuW3SAj0djnHfFQG4m9VbN03mA_MMLlv

Chapter 24: Quality

Quality is those features of a product or service that allows it to satisfy (or delight) customers.

 

Benefits of having a quality system:

A Quality System is the approach used by an organisation to achieve quality. Most quality systems can be classified as either quality control or quality assurance.

1. Impact on sales volume

• If the product/service meets customer needs --> Demand would increase --> Enable the business to increase the level of its profits.
• People become richer --> Desire for high quality goods increase rapidly --> Because of less constrained by level of income.

2. Creating a USP

• Not achievable for all businesses, especially those trying to keep costs low
• Can use quality as a USP --> To increase demand.
• E.g. Often there is an 8-week waiting list for weekend bookings for afternoon tea at the Ritz Hotel in London. Potential customers see service as unique, a mix of:
• Tangible quality --> High quality of products and services provided.
• Intangible quality --> Image linked to the name of the hotel.
• The uniqueness of the service increases customers' desire to enjoy it, ensuring regular and high demand.

3. Impact on Selling Price

• Quality as a USP encourages consumers to pay a higher price for products/services.
• E.g. Food prices in M&S is higher than other supermarkets.
• Customers are willing to pay a higher price for better quality.
• Increases profit margins
• Note: Better quality materials and production needed to achieve high quality products.
• Quality as a USP is common in niche markets e.g. Harrods or Hotel Chocolat
• Greater perception of quality --> The higher the selling price the firm can charge
• E.g. Afternoon tea at the Ritz costs £36 pp.

4. Pricing Flexibility

• Reputation for quality gives business ability to be more flexible in its pricing.
• E.g. British airways charges higher prices to customers who value quality of service on flights. They also have flexibility to offer discounted prices in order to fill planes where necessary - the high price paid by customers would have already guaranteed the firm a profit.

5. Cost reductions

• It is costly to implement a quality system but can reduce business costs.
• No wastage of faulty goods or possible recall of many products already sold --> Expensive Process
• Costs of reworking products in a faulty manner or waste of materials.

6. The firm's reputation

• No quality system = Costly to business reputation.
• E.g. 2006 - Cadbury's reputation was damaged by negative publicity --> Salmonella scare and faulty labelling of products.
• Customers remember unfavourable publicity
• Good quality system --> Prevent problems --> Help business avoid any damage to reputation 

Issues involved in introducing and managing a quality system:

1. Costs

• Administrative expense to set up
• Continual monitoring of production, materials and processes
• For an overall assessment of the value of a quality system --> Costs compared with financial benefits arising from high quality achieved EXCEED costs incurred to achieve it.

2. Training

• Quality assurance relies on a well-trained workforce who can understand and implement the quality system.
• Training is quite expensive
• Create cultural changes e.g. more consultative style of management and greater willingness to give responsibility to workers.

3. Disruption to production

• Short-run -Training programme disruptive to existing production methods.
• Training --> Staff will be taken off the current production line to undergo training.
• This would short term damage quality and quantity of production.
• After training complete --> Further disruption --> Workforce, managers and suppliers must adapt to new systems of quality.
• During this period, mistakes are more likely to happen + danger of company's reputation for quality may suffer.
• Yet once new system established --> Problems should disappear.

Quality Control

Quality Control: A system that uses inspection as a way of finding any faults in the good or service being provided.

- This is where there is inspection at the end (with the end product)

- Firms have now moved on from quality control onto quality assurance.



Quality Assurance

Quality assurance is a system that aims to achieve or improve quality by organising every process to get the product 'right first time' and prevent mistakes ever happening.

 This involves self-checking, concentrating on the process of production.

Benefits of Quality Assurance:

• Ownership of the product rests with the workers, giving them greater responsibility.
• Herzberg argues that there are positive effects on motivation because of this sense of ownership and recognition of the worker's responsibility.
• Costs are reduced because there is less waste and less need for reworking of faulty products.
• With all staff responsible for quality, there should be a higher and more consistent level of quality, which can lead to marketing advantages for the firm.

The problems are the same: Cost, training and disruption to production.

Total Quality Management (TQM)

It is the most widely recognised quality assurance system.

Total Quality Management is a culture of quality that involves all employees of a firm.

It is based on the philosophy of 'right first time'.

Kaizen

Kaizen is a policy of implementing SMALL, incremental CHANGES in order to achieve better quality and/or greater efficiency.

Focussed on making 'continual improvement'.

Quality Standards

Quality Standard: A set of criteria for quality established by an organisation. The standard also requires an organisation to have systems for implementing and monitoring its standards.

BS 5750: A British standards award granted to organisations that possess quality assurance systems that meet the standards set.

ISO 9001: The international standard of quality assurance that is equivalent to BS 5750.

The benefits of these awards are:
- Marketing advantages from the acknowledgement of higher quality standards
- Assurance to customers that products meet certain standards
- Greater employee motivation from the sense of responsibility and recognition
- Financial benefits in the long term (due to elimination of waste and improved reputation of firm).

Quality Summary:

Chapter 20: Measuring the effectiveness of the workforce

Labour Productivity

Labour productivity is a measure of the OUTPUT PER WORKER in a given TIME PERIOD.

Example 1:

 

If a factory has 76 employees and its output is 41,192 units per year, what is its labour productivity?

 

Answer:    41,192

                    76                = 542 units per employee
 

 

 



 

 

 

Labour Turnover

 

Labour turnover is the proportion of employees leaving a business over a period of time - usually a year.

 

 

 

Example 2:

 

 

 

 

 

 

 

 

 

 
 

How to calculate the average number employed:

The average number of employees can be calculated by adding the number of people at the start of the year to the number of people employed at the end of the year and divide the total by 2.

 

Leavers

All leavers are people who leave voluntary and non-voluntary. Non-voluntary leavers would include people who had been made redundant, were sacked or died. Voluntary leavers are people who chose to leave.

 

Internal Causes of Labour Turnover:

• Poor management
• Poor communication
• Poor selection procedures
• Low remuneration rates (pay)
• Monotonous jobs
• Poor working conditions
• Low motivation and morale

External Causes of Labour Turnover:

• New competition
• Higher wages elsewhere
• Better training elsewhere
• More local jobs
• More interesting jobs

 

Issues with high labour turnover:

• Increasing recruitment and selection costs (To replace staff who leave - advertising positions, conducting interviews)
• Increasing induction and training costs (So staff learn the skills needed, staff become familiar with the practices of the business)
• Costs of redesigning jobs in reaction to these rates (Making the job simpler so it is easier to replace staff)
• Reduced productivity rates (Due to skilled staff leaving and new, usually untrained staff joining the business)
• Decrease in morale among existing workers (Unsettling as there is a constant change of work colleagues)

How to improve labour turnover:

• Monitoring (Create a monitoring system that includes: Knowing how labour turnover in the company compares with the industry average, tracking trends in employee turnover over time or identifying area/departments where labour turnover is particularly high)
• Exit Interviews (Can identify problem areas in the organisation and common reasons why workers are leaving. Could discuss pay, training, career prospects or the job itself)
• Recruitment and selection (Money spent here could be regained by low labour turnover)
• Induction and training (Making the employee feel welcome in the firm)
• Reducing turnover of long-term workers (These workers have a huge amount of FIRM-SPECIFIC HUMAN CAPITAL - this is skills and knowledge directly relevant to the firm. To retain these long-term workers they could provide career progression or examine their remuneration)

But don't forget that labour turnover can allow:
- New ideas, skills, talents and enthusiasm to the labour force
- Can help a firm avoid complacency
- Prevent an over-reliance on tried and tested ways of working, making it inflexible in response to changes in its environment
- A business can reduce its workforce slowly without having to resort to redundancies - this is called NATURAL WASTAGE.


Absenteeism

Absenteeism is the proportion of employees not at work on a given day.

 

Example 3:

If 33 out of a workforce of 320 are absent on a given day, what is the absenteeism rate?

Answer:   33
               320     x 100        = 10.3%


To find the rate of absenteeism for a year:

Example 4:
 
If the total number of days that could be worked is 250 (5 days x 50 weeks), the total number of employees is 80 and the number of days lost due to absence is 600, what is the annual rate of absenteeism?
 
Answer:      600    
                80 x 250     x 100        = 3%

Causes of Absenteeism:

- Illness (Unavoidable)
- Transportation issues
- Stress
- Industrial Action (e.g. a strike)
- Avoidance of work

Problems of absenteeism:

- Absence means work has to be covered --> Extra cost of agency workers, overtime rates or extra stress put on present employees

- If new and less skilled staff have to be deployed --> Productivity decreases --> Or Quality sacrificed --> Causes dissatisfied customers --> Adversely affect the profitability of the firm.

- If work cannot be covered, deadlines may be missed.

Strategies to reduce absenteeism:

Health and Safety
Refers to the well being of staff in the workplace.


Includes factors such as:
1. Prevention of accidents with machinery
- Adequate training
- Relevant health and safety procedures adhered to.

2. Prevention of injury (e.g. repetitive strain injury)
- Design of the workplace
- Breaks
- Nature of jobs given

- Most accidents and injuries can be prevented with proper training.
- Health and safety incidents may lead to employee absence and even compensation pay-outs from the business!

Example 5:

If over a period of a year there are 250 actual working days and the number of days lost for health and safety reasons is 5, what is the rate of absenteeism due to health and safety?

Answer:      5 
                 250  x 100      = 2%        

Chapter 18: Measuring and Increasing Profit

Profit

The difference between the income of a business and its total costs.
Profit= Total Revenue - Total Costs

Profitability

The ability of a business to generate profit or the efficiency of a business in generating profit.

Profitability relates the amount of profit to the size of the company.

Profitability % =   Profit (£)         X 100
                        Revenue (£)

Example:

A business makes £100,000 profit in a year by selling £700,000 worth of goods and services over 12 months. Calculate its profitability.

Answer: 100,000    X 100          = 14.3%
               700,000


There are two measures of the size of the company:
1. Sales Revenue (adding up all the income over a period of time, typically a year)

2. Capital Employed (Share capital is the same thing. Involves adding up all the money that has been invested in the company by the owners)

Net Profit Margin

Net profit margin compares the amount of profit to the total sales revenue of the company.

Net Profit Margin Definition: This measures net profit (although operating profit can be used) as a percentage of sales (turnover). Net and operating profits are considered the best measure of a firm's profit, while sales turnover is an excellent measure of scale.

What is net profit and operating profit?

Net profit is profit made from ALL ACTIVITIES. Sometimes this is misleading as a business may make a lot of money by selling an asset that it owns.

Operating Profit is profit made from TRADING (i.e. the MAIN ACTIVITIES of the business). For example, it does not include money gained from a sale of asset.

 

Example 1:

McDonalds financial year 2006/7. The net profit before tax in this year was £319.2m. The sales revenue was £5698.4m and the capital investment was £2796.3m.  What is the net profit margin for this year?

Answer:  319.2      X 100    
              5,698.4                    = 5.6%


Example 2:
 
Calculate the net profit margin if a business has £53,000 in sales, variable costs of £12,920 and fixed costs of £21,000. 

Answer:  £53,000 - (12,920 + 21,000)      x 100
                           53,000                                                  = 36% Net Profit Margin


Whether a percentage is good or bad, can be determined by:
- Comparisons with previous years' figures
- Other businesses in similar industries or competitors

For example, a lowering of the % net profit margin could indicate that the business is having problems controlling its costs.
But an increase could show the business is becoming more efficient in controlling costs or is able to set a higher price.

Return on Capital (ROC)

ROC compares the amount of net profit to the capital invested in the company.

Return of capital Definition: Ratio showing net profit (operating profit if also used) as a percentage of capital invested.

Capital Invested: All of the money provided to the business by owners.

Example 3:
 
Calculate the return on capital employed if a business invests £6,000 in a new project and receives a return of £480.

Answer:  480      X 100    
              6,000                    = 8%


Whether a return is good or bad may depend upon the opportunity cost. For example, a business may consider a return of 5% as too low, as it could have got 5% from the bank.

Methods of improving profits and profitability

3 basic methods to increase profit:

• Increase the price (to widen the profit margin)
• Decrease the costs (e.g. by sourcing cheaper suppliers, employing fewer people, cutting back on advertising)
• Increasing the sales volume (More advertising or product development)

Increasing the price
An increase in the price will widen the profit margin (difference between the price and the cost) and each product sold will generate more profit.

- Most effective with products that are a necessity or have no close substitutes.
- If this is not true, then there is a danger that demand will move to competitors or rival products.

Decreasing Costs

If there are no changes in demand --> It will increase the total profit.

If changes in costs leads or a decrease in quality or efficiency --> Demand for the product will fall.
Could happen because inferior raw materials are being used or workers accepting a lower wage are less motivated and so less efficient than those being paid a higher wage.

Also by reducing overheads (Such as rent, office expenses and machinery costs) - the costs could damage sales. E.g. a retail outlet may be reluctant to move premises with a lower rent if the new location is less accessible to customers. In this case, the savings in costs may be much lower than the decline in sales revenue caused by the unfavourable location.

Other methods of improving profit/profitability

• Investment in fixed assets - Buying new equipment, buildings or vehicles can allow the business to EXPAND its scale of operation and possibly IMPROVE both the EFFICIENCY of production and the QUALITY of the product. As a result, the business could increases its profits by achieving higher sales volume, charging a higher price and cutting its costs.
• Product development - Introduce new, unique products in order to attract more customers. Could allow a higher price to be charged too.
• Marketing - Encourages customers to buy more of the business' products. (e.g. A clever advertising campaign or a sponsorship). Increases the value of the product to the customer, this enables a higher price to be charged. Although marketing adds to the costs of the business, these extra costs should be offset by the additional revenue generated, so profit should increase.
• Human Resource Strategies - Careful selection, recruitment and training of staff + Motivation Strategies --> Greater efficiency of the workforce --> Greater output --> Higher quality products --> Better customer service --> Higher profits 

Distinction between cash and profit

Profitable firms may be short of cash as:
- Its wealth may lie in assets rather than cash (High stock levels)
- Wealth will be in debtors rather than cash (Gives credit)
- Pay dividends to shareholders
- Repaying a long-term loan

Liquidity: The ability to convert an asset into cash without loss or delay.

A firm may buy an asset and expect to make a profit from it in the future. However, cash payments for this asset may lead to the firm being unable to pay suppliers or workers. This could lead to liquidation, forcing the firm to close and sell its assets in order to make these cash payments.