Advanced GCE Applied Business

Transcription

1 ABUS Teachers Guide (A2) draft 1 1 Advanced GCE Applied Business Unit 5: Business decision-making Introduction Unit 5 is the first of the A2 units. It gives an insight into the decision-making processes in business. In this unit learners will study how business decisions are made using various techniques and tools at the disposal of entrepreneurs, managers, and other employees. The range and scope of business decision-making is so wide that learners will be asked to specialise in two decision-making areas from the four in this unit. Decision-making takes place within the marketing function, and learners will study how effective decisions are made, for example when business people forecast sales to help make decisions about investment and employment. Learners will study techniques such as time series analysis, market research and techniques such as sampling. They will also study marketing tools such as product lifecycle analysis, Ansoff's Matrix and the 'Boston Box' used to establish suitable marketing strategies. Because decision-making also takes place within the production function, learners will study the different production methods, and consider the benefits and drawbacks of each in real business situations. The size of the business influences the scale of operations, and they will learn how increased scale and the operation of business on a global scale can lead to improved economies, diseconomies, or both. Learners will also consider the importance of effective stock control and research & development Successful operation of the finance function also relies on effective decision-making. Learners will revisit the different financial statements that provide information used when making financial decisions, and will learn how to calculate ratios that help interpret financial performance. They will also study budgets, budgetary control and costing techniques used to support financial decisions. Learners will have the opportunity to study a number of other decision-making tools. They will study how probability is established, and how decision trees and network diagrams are constructed. They will also learn about the use and construction of index numbers in business, and meet various techniques used by business people in order to judge whether an investment is likely to be worthwhile. Recommended prior reading Units 1 and 2.

2 ABUS Teachers Guide (A2) draft 1 2 Delivering this unit This unit is designed to encourage learners to use various business tools that allow quantification or other clarification of data/information, so that more informed decisions can be made. As the first A2 unit, learners will need to appreciate the switch in emphasis away from investigation and towards decision-making. They will also need to be made aware that some of the A2 content has already been introduced at AS. It is what they now do with this content knowledge - for example, through showing understanding, or by displaying knowledge in the context of valid reasoning - that is particularly important. Decision making and the marketing function Learners have been introduced to key sections in this topic - notably market research and the product life cycle - in Unit 2, where they undertook investigations into (for example) the various types of market research used by actual businesses. There are continuing investigative and 'practical' elements associated with this section, such as carrying out sampling techniques in market research, and therefore learners will need to focus on specific business situations where they can exercise these skills. There is an important numerical element in this section, as in other sections in the unit, and therefore learners will need to practise calculating or constructing answers within the context of the various techniques. Whilst the general techniques may be learnt and taught in a traditional way, it is important that learners can apply them to given real and/or fictionalised business situations. For example, with the product life cycle topic, revision or re-teaching sessions could develop into a more case study-based approach where the learners are given recent historical data concerning a business and its product or service, and are then asked to construct the actual product lifecycle for the given item. Similarly, Ansoff's and the BCG matrix should not be taught in an exclusively theoretical fashion, but should rather be integrated into a real marketing situation where the learners use these tools in the given context. Decision making and the production function This option is likely to be popular with centres that have close links with particular businesses using advanced production functions (either goods or services). In these situations it should be possible for learners to both investigate the use of the production techniques and methods by such businesses, and to then consider the extent to which they inform decision-making. If the businesses operate internationally, it may be appropriate to consider the issue of globalisation at this point. There are also numerical elements in this option, perhaps most notably in the area of stock control. A case study approach here is recommended, which should allow learners to use the results of their calculations to propose certain policies or to make other relevant decisions relating to the control of the stock. The business context should be recognised: for example, the differing stock requirements associated with a foodbased business compared with those of (say) a car manufacturer. Another example relates to research and development, where learners should be allowed to reflect on the comparison between a large-scale business's research and development function, and

3 ABUS Teachers Guide (A2) draft 1 3 the relatively small-scale research activity associated with smaller businesses, in terms of how and why decisions differ on the basis of this varying research information. Decision making and the finance function Learners will again have already met some of this content. They therefore need to appreciate that they are now revisiting such content with a view to exploring how it influences and informs business decisions. The financial statements that are readily available to them - ie, plc published information - are of necessity complex documents, and may need to be simplified and reduced in scale in order to provide a suitable foundation for analysis. Learners will need to be adept with the many numerical calculations required in this option, although they should also realise that the calculations are one step only in the decision-making process. Accurate ratio and variance analysis calculations by themselves are of little value, and learners therefore need to be placed in a situation where they can use the results of these and other calculations to make informed decisions. Other decision-making tools This is a wide-ranging option, which includes techniques that can be used in quite different business situations. It is therefore likely to be beneficial to learners if they are allowed to experience this breadth of use. As with the other units, number-based work forms much of what will be done, again with the requirement that the undertaking of calculations without further analysis and judgement is a relatively pointless exercise. It may be in this option that ICT is used most frequently by learners to support their work: for example, calculation of probabilities, indices, DCF and NPV, and construction of Gantt charts.

4 ABUS Teachers Guide (A2) draft 1 4 Information and advice on the examination General comments The assessment of unit 5 is by on-screen external examination, set and marked by WJEC. The examination will consist of objective and subjective assessment items, based on stimulus information consisting mainly of case studies of actual and/or fictionalised businesses. The examination will be structured to accommodate candidate and centre choice of topics. The examination time is two hours, and there is an additional 10 minutes' reading time allowed. The examination is divided into four sections (papers), each being based on a topic area - marketing, production, finance, and other decision-making tools. Candidates will select two of these sections and will therefore answer questions based on the two related topic areas. One hour is allotted to each section/topic area. Quality of written communication marks will be linked to one or more questions in each section/topic area, which will be indicated on the paper. Regardless of which sections/topic areas are selected for assessment, information about the fictional(ised) business will initially be given, which is common to all four examination sections and topic areas. Each of the four sections/topic areas will also contain additional information that is exclusive to it. Each topic area in the specification (marketing, production, finance, other decisionmaking tools) contains four specific sub-topics, and two or three of these sub-topics will typically be assessed each series. Questions may link two or more sub-topics, and a mix of questions requiring both text-based and number-based answers will normally be set. Question types NB: The following are illustrations only and do not represent all possible question types that may be set on a sub-topic. Examples are also given of some of the key terms from a selection of sub-topics: these may require to be explained and/or may be tested more fully in context. Question types: decision-making and the marketing function Sub-topic 1 - sales forecasting Explain key terms eg time series, trend, seasonal/cyclical/random variation, line of best fit. Compare sales forecast figures with actual sales figures, comment on (simple) variances and give likely reasons for these. Calculate, and/or display on a graph, moving averages. Make forecasts using time series, eg use figures (including given seasonal variations) to calculate and comment on trend and then extrapolate into the future. Consider the value of sales forecasting/time series in context.

5 ABUS Teachers Guide (A2) draft 1 5 Sub-topic 2 - market research Explain key terms eg market research, segmentation, sampling population. Use given information, eg on regional sales performance, to explain how different sampling methods would work in this context and then select and justify a suitable sampling method for the context. Sub-topic 3 - product life cycle Use information given about products and where they lie on the life cycle, then eg comment about possible marketing/promotional strategies. Consider the value of life cycle analysis. Sub-topic 4 - marketing tools Explain Boston Box or Ansoff in context, and/or use them in a given context. Consider the value of eg approaches to pricing or to distribution in context. Question types: decision-making and the production function Sub-topic 1 - production methods Explain key terms eg job, batch, flow, productivity. Suggest an appropriate production method for a given context. Describe how (labour) productivity is calculated and apply this to a given context. Sub-topic 2 - production, scale and costs Describe named internal economies of scale. Explain likely effects of diseconomies of scale. Explain value of location or other external economy of scale in context. Sub-topic 3 - stock control and pricing Explain key terms eg buffer stock, reorder level, lead time. Use EOQ formula (given) to calculate EOQ. Use given figures to calculate FIFO and/or AVCO, and comment on the results. Compare FIFO and AVCO as methods when eg valuing stock. Explain JIT and comment on the value of keeping low stocks or high stocks. Sub-topic 4 - research and development Comment on the value of new product development in context. Explain value analysis in context. Question types: decision-making and the finance function Sub-topic 1 - financial statements Explain key terms eg trading account, going concern, working capital. Construct basic profit & loss accounts and balance sheets from given information. Assess the value of using financial statements to judge business performance. Describe accounting concepts in context. Sub-topic 2 - ratio analysis

6 ABUS Teachers Guide (A2) draft 1 6 Use given results of ratio calculations to assess the situation eg whether business A or B is more solvent/profitable/efficient. Calculate ratios from given information, eg to see whether a business's actual performance meets its targets. Explain the purpose of named ratios. Suggest relevant non-financial information needed when judging financial performance. Sub-topic 3 - budgets and budgetary control Construct a cash budget and comment on the results. Prepare a flexible budget from given information and show variances. Prepare a performance summary (cost; actual; budget; variance) based on calculations or given information, and comment on (eg on variances). Consider the value of fixed budgets and/or flexible budgets. Sub-topic 4 - costing Explain key terms eg marginal costing, variance, absorption costing, indirect costs. Calculate material and labour variances and sub-variances from given information. Use figures to make judgements eg assess whether it is worthwhile stopping making/selling a particular product line, or whether to make or buy a product. Question types: other decision-making tools Sub-topic 1 - probability and decision trees Explain key terms eg probability, expected value. Construct a decision tree diagram (eg from given probabilities and values) and then comment on the results/options. Suggest relevant non-quantitative factors needed to support decision tree analysis in context. Consider the value of decision tree analysis in context. Sub-topic 2 - index numbers Explain relevant terms, eg price index, quantity index, base year. Comment on value of national indexes, eg RPI, CPI. Use a given base year to calculate price or quantity indexes. Explain the value of the results. Sub-topic 3 - investment appraisal Given figures/context, select an appropriate appraisal method and use it to calculate results. Using figures and calculations, assess whether a purchase/an investment is worthwhile, ie calculations involving payback, accounting rate of return, NPV/DCF. Consider the results and/or the value of each method of investment appraisal. Sub-topic 4 - critical path analysis From a list of activities, times and preceding activities, identify a critical path and calculate float. Complete a critical path diagram (given) using figures. Consider the value of critical path analysis in context.

7 ABUS Teachers Guide (A2) draft 1 7 Sample questions NB: these are in addition to the questions in the Specimen Assessment materials. They are not displayed in 'on-line' format and are therefore for practice and illustration only. Decision making and the marketing function 1. Pro-tect Ltd is a long-established business that makes and sells alarm systems. These alarm systems are sold only in the UK, to public and private sector businesses. Pro-tect Ltd faces increasing price-based competition from businesses based elsewhere in the EU, and the directors therefore need to control costs in order to remain competitive. Pro-tect Ltd does not manufacture alarm systems for the UK domestic market, which is highly competitive. The directors are discussing whether to start making household alarm systems for this market. a) How helpful is sales forecasting likely to be if the directors of Pro-tect Ltd decide to start manufacturing alarm systems for the UK household market? Joan Maclachlan, a Sales Department employee, has been asked to create a sales forecast for the new household alarm systems. Joan has produced a sales forecast, which uses statistics from a trade website showing how many alarm systems were bought in the EU two years ago. b) How reliable is Joan's sales forecast likely to be? 2. SailAway Ltd owns a small fleet of car ferries. It competes with other cross-channel ferry companies, 'low cost' airlines and Eurostar, sailing its passengers and their vehicles between a small Welsh seaside town and France. SaliAway Ltd was set up several years ago, following the merger of two sailing companies. The Sales Manager of SailAway Ltd wants to produce a sales forecast of passengers for To do so, the manager will use the following sales figures from Quarter Number of passengers (000) Seasonal variation* (000) January-March 12-2 April-June July-September October-December 12-5 * The formula Actual minus Trend is used to calculate seasonal variations.

8 ABUS Teachers Guide (A2) draft 1 8 a) Describe the sales trend shown in these figures. Show all workings. b) Forecast the number of passengers for each quarter of 2011, and the total number of passengers for the year. c) To what extent can the directors of SailAway Ltd rely on time series analysis to forecast future passenger numbers accurately? Decision making and the production function 1. Pro-tect Ltd is a long-established business that manufactures and sells alarm systems. These alarm systems are sold only in the UK, to public and private sector businesses. Pro-tect Ltd faces increasing price-based competition from businesses based elsewhere in the EU, and the directors therefore need to control costs in order to remain competitive. Pro-tect Ltd does not manufacture alarm systems for the UK domestic market, which is highly competitive. The directors are discussing whether to start making household alarm systems for this market. How important is new product development likely to be for Pro-tect Ltd? 2. The accountant at Pro-tect Ltd has the following record of stock movements in one month. Quantity (units) Unit cost ( ) Total cost ( ) Opening balance, 1 June Receipts, 4 June Issues, 5 June 20 Receipts, 10 June Issues, 12 June 40 Receipts, 19 June Issues, 21 June 10 Closing balance, 30 June a) Calculate the value of the issues and of the closing stock using the average cost method. b) Compare FIFO and AVCO as methods used to value closing stocks.

9 ABUS Teachers Guide (A2) draft 1 9 Decision making and the finance function 1. ReadMe Ltd publishes a range of educational resources. Its resources for GCE Applied Business consist of a student textbook, a student workbook, and a teacher s guide. The following figures are available. Textbook ( ) Workbook Teacher s ( ) Guide ( ) Total ( ) Sales Variable costs Fixed costs Profit / (Loss) (3 400) The directors of ReadMe Ltd are considering stopping publishing the student workbook because of the financial results shown above. a) Examine the situation if the directors carry out this decision. b) Consider whether marginal costing should determine whether to stop publishing the student workbook. 2. Paper-to-go plc is the main supplier of the paper and other materials used by ReadMe Ltd. The accountant at ReadMe Ltd has the following information from the most recent published accounts of this supplier, and also of a possible new supplier, Printit Ltd. Paper-to-go plc Printit Ltd Accounting year January 1 December 31 April 6 April 5 Current ratio 2.2 to to 1 Acid Test ratio 0.4 to to 1 Debtor days 35 days 14 days To what extent will the above information help determine whether ReadMe Ltd continues to use Paper-to-go plc as its main supplier?

10 ABUS Teachers Guide (A2) draft 1 10 Other decision-making tools 1. Findit Ltd makes and sells printed maps. These maps are sold mainly in the UK, in which Findit Ltd is a long-established company and one of the market leaders, and there is a growing overseas market. Findit Ltd s directors are discussing whether to use a multi-colour design style for the new series of maps. They have two options, summarised below. Option A Produce the new maps using the present three-colour style. The probability of continued high sales is 0.62, which will increase profits this year by The probability of a competitor introducing multi-colour maps this year is 0.38, which will cost Findit Ltd in maps that cannot be sold. Option 2 Produce the new maps in new multi-colour style. The probability of high sales is 0.91, which will increase profits this year by The probability that the new multi-colour style will not be popular with buyers this year is 0.09, which will cost Findit Ltd in maps that cannot be sold. a) Examine the options available to Findit Ltd through constructing a decision tree. b) To what extent is decision tree analysis likely to be helpful to the directors of Findit Ltd when deciding whether to change production to the new multi-colour style? 2. Findit Ltd makes and sells printed maps. These maps are sold mainly in the UK, in which Findit Ltd is a long-established company and one of the market leaders, and there is a growing overseas market. The directors of Findit Ltd need to invest in new printing equipment. This will cost They expect it to last five years, although they are aware that the increasing pace of technological change is difficult to assess. The directors expect the equipment will increase profits by a year. They may, however, be forced to rent additional premises due to a lack of space at their existing premises. a) Use one investment appraisal technique to review the potential investment. b) To what extent can the directors of Findit Ltd rely on investment appraisal calculations to help make such decisions?

11 ABUS Teachers Guide (A2) draft 1 11 Summary answers Decision making and the marketing function 1 a) context states Pro-tect is a long established company so there will be past sales figures to use for forecasting but these figures are not from the domestic market context states high competition so forecasting is important forecasting encourages analysis of features of the domestic market, eg regional factors such as varying levels of wealth the directors will need to balance the costs against quality of results and recognise the limitations of sales forecasting b) the forecast is based on secondary data this data is old it is not focused exclusively on the UK the data may include domestic and non-domestic statistics there is no primary research no qualitative methods are used conclusion that use of this data only means the forecast will be unreliable 2 a) The trend is rising - it rises per quarter o Q1 = (12 + 2); Q 2 = (18-3); Q 3 = (20-4); Q 4 = (12 + 5) b) Q1 Q2 Q3 Q4 Trend Seasonal Forecast actual Quarterly totals as shown above - annual total is passengers c) the linear trend can be used to forecast future passenger numbers other quantitative techniques eg sampling, analysis of market research, can give alternative forecasts of passenger numbers qualitative analysis, eg views of current passengers, can also be used but this trend is not guaranteed to continue seasonal variations only - cyclical and random/catastrophic trends not analysed knowledge of the trend informs SailAway about employment, investment and other issues but the reliability of all quantitative techniques data is questionable knowledge of other matters, eg competitor performance, global issues, are needed for a fuller evaluation of these results

12 ABUS Teachers Guide (A2) draft 1 12 Decision making and the production function 1. stages of NPD, eg idea development and analysis, product development, test marketing... context suggests high competition so NPD is necessary to stay competitive context states there are no sales in the domestic market nor outside the UK, so NPD would get Pro-tect into these markets context states there is the need to control costs so Pro-tect will not have great financial resources for NPD judgement that although NPD is important in this context, there are other factors eg related marketing issues such as the product mix or the product life-cycle stage of existing products, and Pro-tect must also consider how NPD will influence its other business functions, eg the need for training (HRM) 2. a) Date Receipts (units) Issues (units) Balance (units) Total stock value ( ) Unit cost ( ) June Price of issue ( ) June June 5 20 (416) June June (840) June June (220) Cost of issues June

13 ABUS Teachers Guide (A2) draft 1 13 b) FIFO is a logical method to use because it typically represents what happens physically - ie, oldest stock is used first the closing stock valuation is likely to be near to the actual cost of replacing the stock but it can be difficult to operate because of the need to identify each batch of stock AVCO smoothes out price fluctuations, which makes it easier to use the data for decision-making and there is no need to separately identify each batch of stock but the average price is not likely to be an actual price that has been paid Decision making and the finance function 1 a) Contribution ( ) Textbook Workbook Guide Total Sales Variable costs Contribution Fixed costs Profit Figures without the workbook ( ) Textbook Guide Total Sales Variable costs Contribution Fixed costs Profit apparent evidence that the workbook makes a loss of but this is influenced by how fixed costs are apportioned (equally here) this may not be appropriate or fair, eg because of the low volume of workbook sales when contribution is calculated, the workbook contributes to meeting the fixed costs if the workbook is dropped, profit appears to fall by 1 400

14 ABUS Teachers Guide (A2) draft 1 14 b) marginal costing uses contribution calculations and analysis marginal costing gives information that is not available through more traditional costing approaches (eg absorption costing) but contribution analysis ignores factors such as market conditions and competitor actions and other factors need to be considered eg the workbook is linked to the other two in the series so discontinuing it may affect sales of the other books there may be spare capacity as a result of discontinuing can this be profitably used? competitors may step in and offer a workbook 2. both companies have sound current ratios/close to the textbook 2 to 1 Printit's acid test ratio is much stronger - Paper-to-go's acid test is low/well below the textbook 1 to 1 but Paper-to-go allows longer credit periods / 5 weeks compared to 2 weeks liquidity ratios suggest Printit is more solvent/more likely to survive as a supplier but debtor days suggests ReadMe would benefit financially by trading with paperto-go as a result of the extended credit conclusion that the figures do not clearly suggest one or the other company ReadMe might gain in the short term from trading with Paper-to-go (credit period) but in the long term Printit seems more stable as a company relative size and market strengths of the companies are not known so may not be comparing like with like the figures are from different financial year-ends, so (eg) seasonality may be a cause of the differences/not comparing like with like the ratios ignore other factors, eg relative speed of delivery, cost and credit terms, quality of the product Other decision-making tools 1. a) Profit Old style A Loss B Profit New style 0.09 Loss

15 ABUS Teachers Guide (A2) draft 1 15 option A success = 0.62 x = option A failure = 0.38 x ( ) = ( ) option A expected value = (OFR) option B success = 0.91 x = option B failure = 0.09 x ( ) = ( ) option B expected value = (OFR) expected values suggest option B is preferable (OFR) b) 2. encourages a quantitative approach to business decisions and leads to an objective comparison based on numerical data context states that Findit is a long established company so will have figures on which to base probabilities decision tree analysis is suitable for tactical decisions but less reliable for strategic ones this is a key decision for Findit so other factors, eg market competition, must be considered decision tree analysis ignores qualitative information, which will be needed it also ignores the unpredictability of the business environment Findit is in a competitive market, and also overseas markets it can be difficult to quantify risks and expected values so the possible inaccuracy of Findit's figures must be considered ARR is appropriate average profits are and the outlay is so ARR is 50% (any relevant variation is acceptable if workings are shown) ARR gives a high rate but this will fall if premises have to be rented Payback could be thought appropriate (accept profits as equivalent to cash though this assumption should be stated) cash inflow is a year so the payback period is 2 years payback shows a quick return this is important because the pace of technological change might mean that five years is over-ambitious (Apply OFR to all arguments)

16 ABUS Teachers Guide (A2) draft 1 16 Unit 6: Business planning Introduction This is the A2 unit that requires learners to plan the setting up and running of a business. It is the synoptic unit, which means that learners will be expected to use business knowledge gained from studying the entire qualification when constructing and presenting the business plan. They will revisit many key concepts, themes and content areas, and will need to select and apply these when creating the plan. Learners will first need to consider possible ideas for their business: for example, in terms of its product, form of ownership and location. To do this, they will need to conduct both primary and secondary research to discover whether their business idea is likely to be successful. Once they have determined through research that their business idea is suitable, learners will need to consider questions focused on the various resources required, such as Human - Will you be the only person working in the business, or will you have a partner or employ staff? Physical - Where will the business be based? Will you rent or buy premises? What equipment is needed? What stocks will be held? Financial - Where will the start-up capital come from? Savings or borrowings? What running costs need paying? How can lenders help? Learners will be expected to provide substantial information, particularly concerning the financial requirements of their business. They are therefore expected to construct documents such as forecast final accounts and cash flow forecasts that illustrate the expected profitability and liquidity of the business. They will also need to consider the quality of their product, and how this can be guaranteed and monitored. Finally, learners will need to project their findings over a substantial time period (three years), and consider the role that contingency planning and 'what if?' scenarios play in helping them determine whether to go ahead with the business plan, and whether a lender such as a bank is likely to provide them with additional finance. Recommended prior reading All other AS and A2 units.

17 ABUS Teachers Guide (A2) draft 1 17 Delivering this unit A synoptic unit is best completed towards the end of the course because it is designed to incorporate skills, concepts, knowledge and understanding gained from the entire qualification. Establishing the business idea Learners can be encouraged to generate ideas by considering factors such as previously studied research and information, their own work or other business experience, or friend and/or family contacts. These ideas must be realistic and manageable in terms of the time frame, and therefore involvement and advice is crucial in ensuring that the student selects - and can deliver - appropriately. Learners will need to consider carefully the link between aims, objectives, legal form and market situation to ensure the business idea is workable and realistic. Confirming the business idea In order to confirm the suitability or otherwise of the business idea, learners will have to undertake some research. Initially, secondary research is likely to be of greater benefit in helping to judge the suitability of the business idea because it is less time consuming and more quickly available. Assuming the idea is likely to be suitable, primary research can then be undertaken in order to start developing an appropriate marketing mix. Here - as elsewhere in the unit - learners can draw on their ICT skills, for example in displaying the results of their primary research. Marketing One of the important features of this unit's work is that the business idea and plan should be as realistic as possible. Therefore, the learners' marketing strategy and the related marketing mix should take relevant influences and constraints fully into account, such as the number and nature of customers and competitors, what promotion and delivery methods are appropriate, and which pricing policy is best suited to the situation. Finance and other resources To ensure realism, learners will need to consider aspects such as business location and must not assume that (say) the school or college - or family members- will lend them space or other facilities free of charge. This theme of realism should continue to inform learners' work: for example, when quality matters are considered it is highly unlikely that a full-blown TQM set of procedures will be appropriate. The more able will recognise realities such as this when analysing and judging the extent to which their plans guarantee satisfactory quality. The use of techniques such as CPA or Gantt charts are likely to feature in learners' work at this point, to illustrate that time constraints and concerns have been addressed. All relevant human and physical resources will need to be considered, and it is important to ensure that learners do not become overambitious in order to avoid over-complexities. For example, the learner will need to consider, if employees are planned to be recruited, the business reality of applying employment law to the situation.

18 ABUS Teachers Guide (A2) draft 1 18 Likely financial sources to support the business idea will need careful considering, as will financial movements over the proposed time period of three years. This means that learners will need to prepare detailed and substantial cash flow statements, both to support their work and to act as a basis for indicating the likely success to a potential lender of finance. It is perhaps at this stage where the synoptic nature of the unit is best seen, because learners will need to review their functional and other planning in terms of its financial implications, both for capital and for revenue expenditure. ICT will again be of great help here, for example in using spreadsheets to construct the various forecasts. Recommendations and evaluation There are a number of different ways in which the learners may choose to undertake evaluation of their business plan. One suitable approach will be to carry out some ratio analysis, with perhaps particular concentration on liquidity rather than profitability given the reality of what happens in most new businesses in the early years. Learners will be familiar with SWOT and PESTEL analyses and may therefore choose to use these techniques to reach appropriate conclusions. It is likely that the stronger evaluations will use each section or main element of the business plan to structure the comments. Construction of the business plan The business plan's key content areas will be outlined in the assignment details, and are likely to include the following: a) explain your business idea, outlining your proposed product (good or service) together with the aims and objectives for your business b) submit evidence of both primary and secondary research into your idea, in order to establish there is a likely demand c) provide details of expected location and the market situation (for example, local competition) in order to consider marketing issues such as product differentiation, pricing, customer service d) plan for all resource requirements - human, financial, physical - needed to produce or provide your product e) explain how quality issues are going to be catered for f) provide a detailed marketing/promotional plan, linked to and influenced by target market and financial considerations g) provide details and calculations of start-up and running costs for your product h) construct a full and detailed financial plan, which contains o an outline of the main funding sources and an opening balance sheet o summary budgets for key costs and revenues

19 ABUS Teachers Guide (A2) draft 1 19 o consideration of working capital requirements and any liquidity issues through the provision of a detailed cash flow forecast for the first year, supported by summary forecasts for the following two years o a breakeven forecast (or an explanation and analysis of why such a forecast is not appropriate) o consideration of likely profit and profitability through the provision of a forecast profit and loss statement for (at least) the first year of trading i) a summary analysis and evaluation of your anticipated business position at the end of each of your first three years of trading Information and advice on assessment of unit 6 The assessment of unit 6 is by digital portfolio of up to 3,000 words*, marked internally but with guidelines set and moderated by WJEC. (*The limit of 3,000 words in length refers to the business plan only and excludes appendices and information in a non-text (eg, numerical) format.) The tasks (a) - (i) above match the assessment criteria detailed in the Specimen Assessment Materials document: AO1 AO2 AO3 AO4 Total (a) - (d) background and resourcing (e) and (f) marketing and quality (g) and (h) financial (i) projection and evaluation Totals The grids shown in the Specimen Assessment Materials will be used to assess candidate performance.

20 ABUS Teachers Guide (A2) draft 1 20 Additional guidance and information on assessment There are 15 marks available for AO1 as shown in the assessment grids. These marks are based on the following analysis. AO1 The business plan will include a requirement to (i) submit information (for example, about the planned business) (ii) use generic business terms and concepts. (iii) utilise appropriate communication and organisational skills. Marks MB1 0 No submission/submission not worth of credit 1-2 Evidence/information is presented with little attention to detail/content and lacks careful interpretation 1 Knowledge of business terms/concepts is at a basic level 1-2 Communication skills and the form and style of writing are adequate but show many errors, and the plan/information organisation lacks clarity Marks MB2 3 Evidence/information is presented in some detail and shows evidence of careful interpretation, with some effective integration into the work 2-3 Sound knowledge of business terms/concepts is shown through their use 3-4 Communication skills and the form and style of writing are good though some errors are present, and the plan/information is organised well Marks MB3 4-5 All major evidence/information contains appropriate detail and is fully interpreted and integrated in the work 4-5 Full knowledge of all relevant business terms/concepts is shown 5 Excellent communication skills, form and style of writing, supported by a professionally organised plan There are 18 marks available for AO2 as shown in the assessment grids. These marks are based on the following analysis. AO2 The plan will include investigation of the specific context, with the need to (i) apply relevant business 'theory' relevant to the context (ii) use information from external sources relevant to the context. Marks MB1 0 No submission/submission not worth of credit 1-3 Generic business theory is rarely applied well and effectively 1-3 Evidence/information is of limited relevance, with little consideration of its vocational importance to the plan/context Marks MB2 4-6 Theory is usually applied, though some evidence of 'pure' theory remains 4-6 Evidence/information is relevant to the plan/context and its vocational importance has been considered through application Marks MB3 7-9 Business theory is fully, carefully and well applied to the plan/context 7-9 Clear understanding of the relevance of evidence/information shown through careful and thorough application to the plan/context

21 ABUS Teachers Guide (A2) draft 1 21 There are 12 marks available for AO3 as shown in the assessment grids. These marks are based on the following analysis. AO3 The plan will require (i) selection and (ii) analysis of information in context. Marks MB1 0 No submission/submission not worth of credit 1-2 Research results show little evidence of planning or thoughtful selection 1-2 Basic and simple analysis of evidence/information that contains errors and does not recognise limitations Marks MB2 3-4 Research results show evidence of some careful planning and selection based on a range of sources, with some recognition of limitations 3-4 Sound analysis with some awareness of its limitations Marks MB3 5-6 Evidence of very careful planning and selection based on a comprehensive range of sources, with analysis of its limitations 5-6 Detailed and thorough analysis with full awareness of its limitations There are 15 marks available for AO4 as shown in the assessment grids. These marks are based on the following analysis. AO4 The plan will include a requirement to assess or evaluate information, and to make judgements or draw conclusions. Marks MB1 0 No submission/submission not worth of credit 1-3 Simple evaluation of short-term (1 year) business position often unsupported by reference to evidence/information 1-2 Basic judgments/conclusions made but not supported, or are inaccurate, and are made with limited supporting evidence Marks MB2 4-6 Sound evaluation of short-term and medium term business position generally supported by reference to evidence/information 3-4 Generally sound and accurate judgments or conclusions are made based on some prior analysis and limited reasoning, but may contain opinion Marks MB3 7-9 Detailed and fully supported evaluation of business position 5-6 Full and accurate judgments or conclusions are made based on supporting detailed analysis, including consideration of any limitations

22 ABUS Teachers Guide (A2) draft 1 22 Unit 7: Managing businesses in an international context Introduction This unit allows learners to study businesses that operate on an international level, and to explore the organisations that influence this operation. After studying this unit learners will be able to compare and contrast business that trade outside the EU with those trading within it, and also with those that choose to trade solely in the UK. Because the UK is a member of the European Union, much of this unit focuses on the EU. Learners will research into its key features, and learn how its institutions and Treaties affect businesses in the UK. The EU establishes certain policies on, for example, economic and social matters, and therefore learners will have the opportunity to study these and to examine the impact that they have upon businesses. Some businesses opt to trade with the rest of the EU, whereas others do not, and learners will explore reasons for, and influences on, these decisions. Because the European Union is not the only international body that affects the work of UK businesses, learners will also will study other regional trade organisations, their purpose and main activities, and how they influence businesses that come into contact with them. They will be in a position to compare businesses trading both within and outside the EU, in terms of features such as their aims and objectives, legal format, and reasons for trading as they do. As well as being influenced by different countries and regional trade organisations, businesses themselves also influence the economies in which they operate. There will therefore be opportunities for learners to judge the impact that specific businesses make in both their home and their host countries. they will explore the links between businesses and the host countries within which they operate, and analyse the benefits to each from this arrangement. By continuing to meet a range of examples, learners will be able to examine the extent to which legal, political, technological, environmental and other factors influence the degree and nature of international trade. Recommended prior reading Units 5 and 6

23 ABUS Teachers Guide (A2) draft 1 23 Delivering this unit The European Union This unit is designed to encourage learners to study businesses that trade on an international scale, to explore reasons for this and to judge the effects of this. One appropriate starting point is to consider the role of the UK as a member of the European Union, and how this membership influences business life in the UK. Learners will need to be familiar with key EU facts and figures, and individual or group research into different features of EU organisation and operation, supported by presentations to the rest of the group, is one possible learning strategy. These individual elements will need synthesising at some stage, and the tutor will need to play an important role in order that learner are able to see 'the whole picture' in terms of interrelationships. Work on EU operation and policies can again consist of much individual or group research, but it is important to recognise that this research must be applied to specific UK businesses, which will give it an appropriate applied focus. Learners may, for example, consider how one business is influenced by EU policies relating to employment, regional support, and sustainable development, and how another is affected by trading in the Eurozone, EU regulations, and the Social Charter. Following the application of EU operation and policies to individual businesses, learners will be able to carry out PEST-type analyses on specific businesses in terms of both why they operate in the EU, and the likely effects of their continuing to do so. The internet is likely to act as one important information and learning resource, but should not be seen as the sole resource for such analysis. As wide a range of businesses as possible - both in terms of industrial sectors within which they operate, on also whether they are b2b (business to business) or b2c (business to consumer). International trade The unit acknowledges that many businesses trade internationally but outside the EU. Learners are encourage to research into other international trade organisations, and again small-group activity is one appropriate strategy. As with research into the EU, this may best be undertaken by looking at these organisations through the eyes of businesses and business people actually trading there, to ensure learners appreciate the realities and relevance of international trade. Tutors will decide the number and scope of such organisations, which could include ones as diverse as the United Nations, OPEC, the IMF and international charities such as Save the Children. Research is likely to be internet-based to a certain extent, although access to other sources such as newspaper articles, speakers from and visits to relevant organisations should be accessed wherever possible. In this section, learners may be introduced to the g2b (government to business) or g2c (government to consumer) sectors. Once the scene is set, learners will be able to analyse similarities and differences between UK-based businesses that trade exclusively within the EU, and those that trade outside the EU. Direct comparisons can therefore be made, perhaps using functional areas and/or job roles as bases for these comparisons, and presented to the rest of the group.

24 ABUS Teachers Guide (A2) draft 1 24 Home and host countries Whilst much of the previous study has been from a business perspective, learners also need to understand that international trading has an effect on, and is influenced by, the host country. Studying individual businesses and government policies will enable learners to appreciate and judge benefits gained by the former as a result of receiving host country incentives. By using the UK as the initial focus, for example through studying government web pages, newspaper articles and undertaking local research, learners will be able to form judgements as to the impact made by international businesses on the local, regional and national economy. The current pace of development in countries such as China and India should also act as an appropriate source for analysing specific impacts made by international businesses. Home, EU and international trade Although Unit 6 is named as the synoptic unit, teachers will acknowledge that there is a synoptic influence in the other units. In terms of Unit 7, it occurs in this section. Learners are required to compare and contrast UK-based, EU-based and internationalbased businesses, and a suitable way to achieve this is to focus on aspects such as functional organisation, marketing/trading environment, employment policies, cultural and social issues, which requires substantial and wide-ranging business knowledge and understanding. Approaches to this section are likely to be based on research activity and discussion/presentation of findings. Additional assessment guidance: unit 7 The assessment of unit 7 is external (initially centre assessed, the assessment being externally verified by WJEC), through the use of a controlled assignment comprising of a WJEC-written project on which candidates undertake research. The controlled assignment will consist of tasks linked by reference to the given context. The grids shown in the Specimen Assessment Materials will be used to assess candidate performance.