AQA Business

FACTS TO KNOW CHRISTMAS CHALLENGE

Christmas challenge
TheChristmas Challenge:
20memorablecritical facts per subject
A simple test (multi-choice) for each bank of facts
Provide to students before Christmas
Students will then be giventhe facts to memorise over Christmas
Return in January, sit the same test (the questions can simply be re-ordered)

Fact 1: Common Business

objectives
1. Profit maximisation: make as much profit as possible, typically satisfy
shareholders
2. Profit Optimisation: getting the right balance so not to exploit customers
but also sustain growth and success
3. Growth: expansion of the business in competitive markets
4. Cash flow management: vital in small firms, cash flow must remain
positive, focus of all in the firm
5. Survival: links with economic conditions and cash flow management
6. Social/Ethical: businesses focus on this but unsure how much they
commit to this due to impact on profits/growth opportunity

Fact 2: Shareholders
1. Shareholders: invest capital into a business, receive dividends back from
PLC businesses, most decision making is based around shareholder
expectations
2. Share price: value of a share, price increases/ decreases due to
internal/external factors. Falling share price suggest uncertainty about the
businesses future and existing performance
3. Ordinary share capital: value of a firm based on original share price
1.

original share price x shares issues = ordinary share capital

4. Market capitalisation: value of a firm based on todays share price

1.

todays share price x shares issued = market capitalisation

5. Most large PLCs are focused on short termism in the UK, a huge
influence on decision making

Fact 3: external influences on

decision making
1. Market conditions: recession, economic boom, consumer tastes and
fashions, disruptive change
2. Competition: competitive pressures can affect price, investment decisions,
product ranges,
3. Household incomes: increasing incomes lead to changes in buyer decision
making
4. Interest rates: a charge for lending money and a benefit for saving money.
Low levels of interest increase borrowing and investment and spending in
an economy
5. Demographics: firms look at age/gender/ethnicity
6. Environmental/Fairtrade: firms that embrace these approaches may find
decision making limited

Fact 4: Druckers view on

managers
Focuses on what managers SHOULD do
1. Set objectives for staff based on corporate aims
2. Create the right teams to achieve the objectives set
3. Motivate staff and ensure delegation is at the heart of motivation
4. Prepare staff for change, help staff learn to learn and embrace future
potential job roles

Fact 5: Blake Mouton Grid

Analysis of styles of leadership
Measures two factors for
management

Source: http
://www.riskmanagement365.com/2012/12/22/what-is-blake-moutons-managerial-grid/

Fact 6: Tannenbaum Schmidt

Continuum

Source: http://
www.tutor2u.net/business/reference/leadership-styles-tannenbaum-and-schmidt-continuum-ofleadership

Fact 7: decision trees

Diagrams to help management with decision making and assessing options
1. Decision trees allow for uncertainty and considers a logical approach
2. However they do contain a degree of optimism and figures may not be
meaningful

Fact 8: Stakeholder mapping

Mendelow
1991 Professor Mendelow created a matrix to measure stakeholder power
against stakeholder interest in a business

Source https
://bizzledizzle.com/strategy/mendelow-matrix/mendelows_matrix/

Fact 9: internal vs external

influences on marketing
objectives
New corporate objectives influencing
company direction
New Management/ CEO
Development of new innovative
products
Financial objectives/ financial
constraints

Changes in fashion and consumer buying behaviour's

Competition and their marketing approaches
Economic pressures including recession, real incomes, interest rates and global
New technologies including social media and e-commerce spend requiring a new
marketing approach

Fact 10: Market research and

confidence intervals
1. Market research informs a firms decision making
2. Qualitative: based on information and opinion
3. Quantitative: based on numbers and data
4. Firms use sampling including quota, random and stratified
5. Confidence intervals: a range accepted from an actual result
6. E.g. how often the data is correct within a given range. 95% of the time a
result will be found within the range 70+-5

Fact 11: PED and YED

PED
Price elasticity of demand
Price elastic is highly price sensitive
and result of above 1
Price inelastic is not very price
sensitive and results below 1
% change in quantity demanded/ %
change in price

YED
Income elasticity of demand
Normal goods have positive income elasticity between 0.1 and 1.5
Luxury goods 1.5 and above
Inferior goods less than 1

Fact 12: Marketing Mix 7Ps

Fact 13: Boston Matrix

Boston Matrix is a theory that examines the product portfolio and position of
a firms products
A useful tool in examining current position
But limited as it only assesses current position

Source http://
www.tutor2u.net/business/reference/boston-matrix-andproduct-portfolios

Fact 14: Operational efficiency,

labour productivity
Labour productivity is a measure of efficiency
Productivity is output, however a firm must be efficient in its approach to
production
If productivity increases and wages stay the same, labour costs per unit will
fall
Output per period/ number of employees in same period
Increase productivity: motivate, train, invest

Fact 15: Lean Production

Aim: produce more using less
Approaches include JIT/TQM/ time based management
JIT: Just in time, run with minimum stocks, improve liquidity
TQM: Total Quality Management where every individual is focused on making
minor improvements throughout the production process
Time based management: manage time in the same way as costs, look to
shorten processes
Lean production creates high levels of productivity and focuses on low stock
levels

Fact 16: Capacity utilisation

(Current output/ maximum possible output)*100
Measures a firms output level as a % of their maximum output level
Firms should have some spare capacity to meet changes in demand but it is
industry dependent
Labour intensive production: labour costs dominate production
Capital intensive production: costs are mostly tied up in purchasing and
operating machinery

Fact 17: Financial calculations

Revenue: quantity x average selling price
Profit: total revenue total costs
Break even: FC/ (SP VC) or Fixed costs/ contribution
Contribution: SP-VC
Profit = total contribution fixed costs
Operating profit margin = (operating profit/ revenue)*100

Fact 18: increasing profit

Approaches for increasing profits include
1. Reducing costs (suppliers/wages?)
2. Increasing Revenue/ price
3. Combine both
4. Link this to PED!

Fact 19: Motivation theory

FW Taylor: motivation through pay and specialisation/ division of labour
Maslow: hierarchy of needs
Herzberg: two factor theory: motivators and hygiene factors, was against pay
as a motivator
All theories provide management with a perspective. All have their flaws
however, they have been an important starting point for many of todays
approaches

Fact 20: Financial and non

financial methods of motivation
Financial
Piece rate pay: based on quantity
produced. May sacrifice quality
Commission: pay in addition to
salary, incentivised, may invite
dishonesty in sales people
Salary: monthly payment for work
completed, pay is for input rather
than output
PRP: performance related pay, based
on hitting targets, may cause conflict
amongst staff

Non financial
Job enlargement: increasing scope of job
Job rotation: employees understand many components of the business
Job enrichment: responsibilities are extended vertically
Empowering employees: providing decision making responsibilities/ delegation