GCE A/L Business Studies cheat sheet

Business environment splits into internal (owners, employees, resources, culture) and external (micro and macro) layers; only the internal layer is directly controllable.

Micro environment: customers, suppliers, competitors, intermediaries, financiers, and the public - these affect the firm directly and are influenced by its own actions.

Macro environment uses PESTLE: Political, Economic, Social, Technological, Legal, Environmental; these forces are outside the firm's control.

Economic environment indicators: inflation, interest rate, exchange rate, unemployment, GDP growth, and disposable income. Rising interest rates raise borrowing costs and reduce demand for credit-financed goods.

A stronger domestic currency makes exports dearer abroad and imports cheaper at home, hurting export-led firms and helping import-dependent ones.

Social factors include demographic change, ageing populations, urbanisation, and changing lifestyle and ethical-consumption patterns.

Technological change shortens product life cycles and raises the fixed cost of staying competitive; firms that under-invest lose cost and quality advantage.

Environmental (green) pressures add compliance costs but can create differentiation advantage through eco-labelling, recycling, and energy efficiency.

Business cycle phases - boom, recession, slump, recovery - shift demand elasticity: income-elastic goods (luxuries) suffer most in recession, inferior goods may gain.

Sole trader: unlimited liability, no separate legal personality, taxed as personal income, minimal formalities, capital limited to owner's savings and borrowing capacity.

Partnership: 2–20 partners (with statutory exceptions), unlimited joint and several liability unless a Limited Liability Partnership is registered, governed by a partnership agreement.

Private limited company: separate legal personality, limited liability, shares not offered to the public, minimum one shareholder and one director.

Public limited company: may offer shares to the public, usually requires a minimum issued share capital and trading certificate before it can trade.

Cooperative: one-member-one-vote control, profits distributed as dividends on patronage, run to serve members rather than outside shareholders.

Franchise: franchisee pays initial fee plus ongoing royalty for the right to use a proven brand and system; franchisee bears most capital risk.

Public corporation (state-owned enterprise): capital from government, objectives may include public service obligations rather than profit maximisation.

Joint venture: two or more firms create a separate entity to share cost, risk, and market access; control and profit are shared by agreement.

Entrepreneurial motives include profit, independence, and opportunity exploitation; key traits cited are risk-bearing, initiative, innovation, and self-confidence.

Profit maximisation occurs where marginal cost equals marginal revenue (MC = MR); profit satisficing targets an acceptable return rather than the maximum.

Revenue maximisation occurs where marginal revenue equals zero (MR = 0); sales maximisation is a related objective pursued by managers seeking growth and status.

Growth objectives are measured by turnover, market share, or asset base; growth can be internal (organic) or external (merger or takeover).

Shareholder value is measured by dividend per share, earnings per share, and share price; managers may pursue their own objectives instead (principal–agent problem).

Stakeholders: shareholders, employees, customers, suppliers, lenders, government, local community, and pressure groups.

Stakeholder mapping uses power and interest: high power/high interest = key players to manage closely; low power/low interest = minimal effort.

Conflict examples: higher wages raise employee satisfaction but cut short-term profit; lower prices please customers but reduce margin.

Corporate social responsibility and the triple bottom line (profit, people, planet) reframe objectives beyond financial return.

SMART objectives are Specific, Measurable, Achievable, Relevant, Time-bound; mission and vision sit above objectives in the hierarchy.

Market segmentation divides buyers by demographic, geographic, psychographic, and behavioural variables; targeting selects segments; positioning fixes the offer in the buyer's mind.

Marketing mix (4Ps): Product, Price, Place, Promotion; services extend to 7Ps adding People, Process, and Physical evidence.

Price elasticity of demand = % change in quantity demanded / % change in price; |PED| > 1 is elastic (price cut raises revenue), |PED| < 1 is inelastic (price rise raises revenue).

Product life cycle: development, introduction, growth, maturity, decline; strategy shifts from awareness-building to differentiation to cost efficiency to harvesting.

Ansoff matrix: market penetration (existing product/existing market), product development (new product/existing market), market development (existing product/new market), diversification (new product/new market).

Boston Consulting Group matrix: stars (high growth, high share), cash cows (low growth, high share), question marks (high growth, low share), dogs (low growth, low share).

Pricing strategies: cost-plus, penetration (low entry price), skimming (high launch price), competitive, predatory, and psychological pricing.

Promotion mix: advertising, sales promotion, personal selling, public relations, direct marketing; choice depends on budget, product type, and target audience.

Market research splits into primary (surveys, interviews, observation, test marketing) and secondary (internal records, published statistics, competitor reports).

Job production: one-off bespoke output, high unit cost, high flexibility; batch production: groups of identical units, moderate cost and flexibility.

Mass production: high volume, standardised, low unit cost via economies of scale; flow production is continuous and highly capital-intensive.

Labour productivity = output / number of employees; capital productivity = output / capital employed.

Capacity utilisation (%) = (actual output / maximum possible output) × 100; low utilisation raises unit fixed cost.

Break-even output (units) = fixed costs / (selling price per unit − variable cost per unit); margin of safety = actual sales − break-even sales.

Economies of scale: technical, purchasing, managerial, financial, marketing; diseconomies arise from coordination and motivation problems at large scale.

Quality control inspects output after production; quality assurance builds quality into the process; TQM involves all employees and targets zero defects.

Just-in-time stock control receives materials only as needed, cutting holding costs but raising supply-chain vulnerability.

Lean production removes waste (overproduction, waiting, transport, overprocessing, inventory, motion, defects) and uses kaizen for continuous improvement.

HR planning forecasts demand for labour from output targets and supply from existing staff, turnover, and external labour market conditions.

Recruitment is attracting candidates; selection is choosing among them (interviews, tests, assessment centres, references).

Training types: induction, on-the-job (coaching, job rotation), off-the-job (courses, simulation); appraisal methods include rating scales, 360-degree feedback, and MBO.

Maslow's hierarchy: physiological, safety, social, esteem, self-actualisation - lower needs must be met before higher ones motivate.

Herzberg's two-factor theory: hygiene factors (pay, conditions, policy) prevent dissatisfaction; motivators (achievement, recognition, responsibility) create satisfaction.

Taylor's scientific management uses division of labour, time study, and piece-rate pay; Mayo's Hawthorne studies showed social factors affect output.

Labour turnover (%) = (number of leavers / average number employed) × 100; high turnover raises recruitment and training costs.

Absenteeism (%) = (days lost / total possible working days) × 100.

Dismissal is termination for cause; redundancy arises when a job disappears; both require fair procedure to avoid unfair-dismissal claims.

Accounting equation: Assets = Liabilities + Equity (Capital).

Gross profit = Revenue − Cost of goods sold; net profit = Gross profit − expenses.

Cost of goods sold = Opening inventory + Purchases − Closing inventory.

Gross profit margin = (Gross profit / Revenue) × 100; net profit margin = (Net profit / Revenue) × 100.

Return on capital employed (ROCE) = (Operating profit / Capital employed) × 100.

Current ratio = Current assets / Current liabilities (around 2:1 often cited); acid-test ratio = (Current assets − Inventory) / Current liabilities (around 1:1).

Gearing (%) = (Long-term debt / Total capital employed) × 100; high gearing raises financial risk when interest rates rise.

Break-even output = Fixed costs / Contribution per unit, where contribution = price − variable cost per unit.

Cash flow forecast records inflows and outflows by period; profit is not cash - credit sales and stock build-up create a cash gap.

Depreciation spreads the cost of a non-current asset over its useful life; straight-line = (cost − residual value) / useful life.

Contract essentials: offer, acceptance, consideration, intention to create legal relations, and capacity; breach gives the injured party a remedy.

Consumer protection typically covers goods being of satisfactory quality, fit for purpose, and as described; remedies include refund, repair, or replacement.

Employment law covers written particulars of employment, minimum wage, working time limits, health and safety, and protection against unfair dismissal and discrimination.

Separate legal personality (salomon principle) means a company is liable for its own debts; limited liability protects shareholders up to unpaid share capital.

Insolvency: liquidation winds up the company; administration places it under an administrator to rescue it as a going concern where possible.

Intellectual property: patents protect inventions, copyright protects original works, trademarks protect brand identifiers, trade secrets protect confidential know-how.

Ethical codes set standards on bribery, conflicts of interest, fair treatment, and honest advertising; they supplement but do not replace law.

Stakeholder versus shareholder ethics: shareholder view maximises owner return; stakeholder view weighs impact on employees, customers, community, and environment.

Whistleblowing is disclosure of wrongdoing; legal protection typically applies when internal channels fail or the matter is serious.

Communication process: sender → encoding → medium → decoding → receiver → feedback, with noise reducing fidelity at every stage.

Channels split into formal (reports, memos, meetings) and informal (grapevine); horizontal flows coordinate peers, vertical flows carry instructions and feedback.

Barriers include jargon, distortion through hierarchy, information overload, cultural difference, and emotional filtering.

ICT applications: MIS for decision support, EDI for trading documents, CRM for customer data, ERP for integrated business processes.

E-commerce models: B2B, B2C, C2C, and B2G; each changes cost structure and market reach.

Databases support marketing through segmentation and targeting, but data protection law restricts collection, storage, and transfer of personal data.

Automation and CAD/CAM raise capital cost but improve consistency, speed, and design flexibility.

Digital communication lowers transmission cost but raises risks of data breach, downtime, and over-reliance on a single system.

SWOT analyses internal strengths and weaknesses against external opportunities and threats; it informs strategy but does not itself set objectives.

Porter's generic strategies: cost leadership, differentiation, and focus (cost focus or differentiation focus); being 'stuck in the middle' is a strategic risk.

Porter's five forces: threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, competitive rivalry.

Product portfolio analysis (BCG) guides resource allocation: fund cash cows, invest selectively in stars, decide on question marks, divest dogs.

Kotter's eight steps for change: urgency, coalition, vision, communicate, empower, short-term wins, consolidate, embed in culture.

Lewin's model: unfreeze, change, refreeze; resistance arises from habit, fear of job loss, and unclear communication.

Organic growth is slower but preserves control and culture; mergers and acquisitions are faster but carry integration and culture-clash risk.

Strategic drift occurs when strategy lags behind environmental change; continuous environmental scanning is the standard countermeasure.

Decision trees weigh expected monetary value = probability × outcome, minus cost, to compare strategic options under uncertainty.