OCR GCSE Business: Business Activity, Marketing and People — Revision Notes

Condensed for the final weeks. For the full explanation, use the Business Activity, Marketing and People study guide.

Purpose and ownership

Not Business 1 content. Added value is not a J204 term, and break-even is topic 5.4 of Business 2 (J204/02), which is where synoptic questions are set. This example is kept as background for Business 2; Business 1 (J204/01) does not examine it.

added value = selling price - cost of bought-in materials

Added value is not profit — wages, rent and overheads still come out of it.

Worked example. A bakery pays 80p in ingredients and packaging per loaf and sells at £2.20, selling 500 loaves a day with fixed costs of £400 a day.

added value per loaf = 2.20 - 0.80 = 1.40
total contribution   = 1.40 x 500  = 700
profit               = 700 - 400   = 300 per day

break-even output = fixed costs / contribution per unit
                  = 400 / 1.40 = 286 loaves (nearest whole loaf)

Business 1 content (1.3):

Structure	Liability
Sole trader	Unlimited
Partnership	Unlimited
Private limited (Ltd)	Limited
Public limited (plc)	Limited

Unlimited liability means personal assets can be taken to pay business debts. That phrase earns the mark. And a plc is private sector, not government-owned — “public” refers to who may buy shares.

Objectives change over time: survival first for a start-up, then profit, growth and market share. They should be SMART — “increase sales” is not an objective; “increase sales by 10% in twelve months” is.

Entrepreneurs organise the other factors of production and bear the risk. Motives include profit, independence, filling a gap in the market, and personal or social goals; risks include failure, loss of capital and long hours, set against the reward of profit and control.

Stakeholders — owners, employees, customers, suppliers, government and the local community — frequently have conflicting interests: higher wages please employees but reduce profit; expansion pleases owners but may disturb the local community.

Market research

Primary is collected first-hand — relevant and current, but costly and slow. Secondary already exists — cheap and immediate, but may be out of date or gathered for another purpose.

Quantitative tells you how many; qualitative tells you why. Most decisions need both.

Segmentation: demographic, geographic, psychographic, behavioural.

The marketing mix

Product — the product life cycle runs introduction → growth → maturity → decline, with extension strategies (new packaging, new markets, updates, price cuts) used to delay decline.

Price:

Strategy	Use
Skimming	High launch price for something new
Penetration	Low launch price to win share
Cost-plus	Simple but ignores the market
Competitive	Matching rivals
Psychological	£9.99

Promotion — advertising, sales promotion, PR, social media, sponsorship. Place — shops, e-commerce, wholesalers, direct.

The four Ps must be consistent with each other. Premium pricing sold through discount channels sends contradictory signals — spotting that in a case study is worth more than listing the four Ps.

People

Recruitment: job description (the role), person specification (the candidate). Internal recruitment is cheaper, faster and the candidate is known, but brings no new ideas and leaves another vacancy. External brings fresh perspective but costs more and carries more risk.

Training: induction, on-the-job (cheap, relevant, but the trainer’s bad habits pass on), off-the-job (broader and higher quality, but expensive and time away from work).

Motivation:

• Taylor — money is the main motivator.
• Maslow — a hierarchy from physiological needs to self-actualisation.
• Herzberg — hygiene factors (pay, conditions) prevent dissatisfaction; motivators (achievement, recognition, responsibility) create satisfaction.

Herzberg’s distinction is the one that pays: pay is a hygiene factor, so a pay rise removes dissatisfaction but does not motivate — which is why its effect fades while job enrichment lasts.

Financial methods: wages, salary, commission, bonus, profit share. Non-financial: job enrichment, rotation, empowerment, teamworking, flexible working.

Organisation

Tall structures have many levels and narrow spans of control — close supervision, clear promotion, but slow communication. Flat structures have few levels and wide spans — fast communication and empowerment, but managers can be overstretched.

labour turnover = leavers / average number employed x 100

High turnover raises recruitment and training costs and loses knowledge, though some turnover brings in fresh ideas.

Exam traps

• Assuming every business’s main objective is profit — a start-up may aim first for survival, and objectives change as a business evolves (1.4).
• Saying limited liability means limited debts.
• Treating a plc as government-owned.
• Objectives that are not SMART.
• Listing the four Ps without checking consistency.
• Saying pay always motivates.

Self-test

1. Why might a new business and an established business have different objectives?
2. Distinguish unlimited from limited liability.
3. Give one advantage and one disadvantage of internal recruitment.
4. Explain Herzberg’s distinction and its practical consequence.
5. Compare tall and flat structures.

Answers: 1. A new business usually aims first for survival, covering costs and building customers; an established business can aim for growth, market share or profit, because objectives change as a business evolves. 2. Unlimited liability means the owner’s personal assets can be seized to settle business debts; limited liability restricts loss to the amount invested. 3. It is cheaper and faster and the candidate is already known, but it brings no new ideas and creates another vacancy. 4. Hygiene factors such as pay prevent dissatisfaction but do not motivate, while motivators such as recognition and responsibility create satisfaction — so a pay rise gives a temporary lift while job enrichment gives a lasting one. 5. Tall structures have many levels and narrow spans, giving close supervision but slow communication; flat structures have few levels and wide spans, giving faster communication but potentially overstretched managers.