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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
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.