Business Objectives and Strategy | OCR A-Level Business H431 (H431)

Business Objectives and Strategy

497 questions
34 subtopics
Assessed on all three papers
Component 01, Component 02 and Component 03

Business Objectives and Strategy is examined in all three written papers — the specification is assessed in full on every one of them, and they differ by the context questions are set in rather than by content.

It covers aims, objectives and the hierarchy that links them, setting SMART objectives, communicating and revising business objectives, stakeholders and their objectives, stakeholder conflict and its management, stakeholder power and influence, mission statements and business purpose, corporate social responsibility and the profit trade-off, building and judging a CSR profile, strategy, tactics and implementation, the business plan and the Plan-Do-Review cycle, risk and reward, quantifiable and unquantifiable risk, uncertainty and its causes, opportunity cost in business decisions, contingency planning and crisis management, Porter's Five Forces, Porter's generic strategies and competitive advantage, the purpose of performance measurement, financial measures of business performance, ratio analysis: profitability, liquidity and efficiency, non-financial measures of business performance, forecasting and its limits, qualitative forecasting methods, forecasting sales, costs, profit and cash flow, time series analysis and moving averages, correlation, extrapolation and index numbers, the business decision-making process, decision trees and expected values, Ansoff's matrix, conflicting results from decision-making tools, causes, types and barriers to change, change management models: Lewin, Kotter and 7-S and leading change and using external consultants.

Sample questions from Business Objectives and Strategy

Answer each one closed book first, then open the answer.

Aims, objectives and the hierarchy that links them

Give an example of an operational objective.

Show the answer
Producing 500 units a day on a particular production line is an operational objective, because it concerns the day-to-day running of one part of the business.
Stakeholder conflict and its management

Why might the local community and shareholders disagree over an expansion?

Show the answer
Expansion raises output and profit for shareholders, but brings extra traffic, noise and building on open land for residents.
Building and judging a CSR profile

How can a strong CSR profile help recruitment?

Show the answer
Many people prefer to work for an employer whose values they share, so a good profile widens the applicant pool and can reduce labour turnover.
Quantifiable and unquantifiable risk

Why does the distinction between quantifiable and unquantifiable risk matter in decision making?

Show the answer
Quantifiable risks can be built into an expected value calculation, while unquantifiable ones have to be handled by judgement, contingency planning and caution.
Porter's Five Forces

When is the bargaining power of buyers high?

Show the answer
When buyers are few and large, the product is undifferentiated, switching costs are low, and buyers can easily compare prices or produce the item themselves.
Ratio analysis: profitability, liquidity and efficiency

Why is return on capital employed described as the primary profitability ratio?

Show the answer
It relates profit to the money invested to earn it, so it shows how well the business uses all of its capital and can be compared with the return available elsewhere.
Forecasting sales, costs, profit and cash flow

A business forecasts revenue of £540,000 and total costs of £482,400. Calculate its forecast profit.

Show the answer
Forecast profit is £57,600.
Decision trees and expected values

How is the expected value at a chance node calculated?

Show the answer
Multiply each possible outcome by its probability and add the results together.

The 34 subtopics

One subtopic is one session. Work down the list.

Subtopic	What it covers	Questions
Aims, objectives and the hierarchy that links them	Recall questions on aims and corporate objectives, strategic, tactical and operational objectives, the hierarchy of objectives and who sets each level, and how objectives differ between private, public and third sector organisations, start-ups, regulated businesses and family firms.	14
Setting SMART objectives	Recall questions on what SMART stands for, why objectives must be measurable, achievable and time-bound, the risks of targets that are too easy or unrealistic, how objectives guide resources, stakeholders and appraisal, the drawbacks of numerical targets, and agreeing objectives with staff.	14
Communicating and revising business objectives	Recall questions on communicating objectives to employees, cascading objectives and management by objectives, two-way communication, the damage poorly communicated objectives do to departments, motivation and suppliers, the difficulties in multinationals, and why and how a business changes its objectives.	14
Stakeholders and their objectives	Recall questions on stakeholders and shareholders, internal and external stakeholder groups, and the objectives of employees, shareholders, suppliers, the local community, government, banks, customers, pressure groups and trade unions, and the divorce of ownership from control.	14
Stakeholder conflict and its management	Recall questions on why stakeholder objectives conflict, the classic conflicts between shareholders, employees, customers and suppliers, and how a business manages them.	14
Stakeholder power and influence	Recall questions on what gives a stakeholder group influence, what a stakeholder map shows, and how to treat groups of high and low power and interest.	13
Mission statements and business purpose	Recall questions on what a mission statement is, how it differs from a vision statement, why it sits at the top of the hierarchy of objectives, and what it is for.	14
Corporate social responsibility and the profit trade-off	Recall questions on corporate social responsibility and going beyond the law, Carroll's pyramid, the triple bottom line, how CSR reduces short-term profit but can raise long-run profit, conflicts with growth and cost leadership, greenwashing, and the pressure on listed companies.	14
Building and judging a CSR profile	Recall questions on a business's CSR profile, practical ways to improve it through operations and employment practices, its benefits for recruitment, costs and regulators, its drawbacks, its effects on suppliers, customers and investors, proving CSR claims genuine, and CSR in small businesses.	13
Strategy, tactics and implementation	Recall questions on strategy and tactics and how they relate to objectives, strategic drift, deliberate and emergent strategy, implementation plans, network diagrams and pilots, the costs of changing strategy, criteria for a suitable strategy, and why a strategy that works for one business fails at another.	16
The business plan and the Plan-Do-Review cycle	Recall questions on the purpose and contents of a business plan, including the executive summary, market research, cash flow forecast, management team and risk assessment, its benefits and drawbacks, the Plan-Do-Review cycle and why review is skipped, and strategic reviews.	16
Risk and reward	Recall questions on risk and reward and the relationship between them, why lenders and shareholders demand higher returns for risk, risk appetite, cash reserves and diversification, the risk of taking no risk, entering markets at different life cycle stages, and profit as the reward for risk.	14
Quantifiable and unquantifiable risk	Recall questions on quantifiable and unquantifiable risk with examples, why only measurable risks are insurable, ways to reduce risk including market research, hedging, buffer stock and dual sourcing, the consequences of poor risk management, and the risks an entrepreneur bears under unlimited liability.	16
Uncertainty and its causes	Recall questions on uncertainty and how it differs from risk, its internal and external causes including exchange rates and technology, and its effects on objectives, planning, forecasts, investment, finance and employees, together with scenario planning and building flexibility.	14
Opportunity cost in business decisions	Recall questions on opportunity cost, why it arises, how to identify it in a spending decision, and why it never appears in a set of accounts.	13
Contingency planning and crisis management	Recall questions on contingency planning and crisis management, business continuity plans, the events a plan covers, naming responsible individuals, the benefits, drawbacks and testing of plans, why insurance is not enough, crisis priorities and communication, and handling a product recall.	15
Porter's Five Forces	Recall questions on Porter's Five Forces, the threat of new entrants and barriers to entry, supplier and buyer bargaining power, the threat of substitutes, what intensifies competitive rivalry, using the model to improve a position, its limitations, and why airline profits are low.	15
Porter's generic strategies and competitive advantage	Recall questions on competitive advantage and what makes it sustainable, Porter's generic strategies of cost leadership, differentiation and focus, their risks, being stuck in the middle, criticism that the strategies can be combined, and a budget airline as a cost leader.	14
The purpose of performance measurement	Recall questions on financial and non-financial performance measures, why businesses measure performance, comparisons and benchmarking, how targets distort behaviour, using several measures, what lenders, employees and communities look for, judging overall success, and profitability, liquidity and efficiency measures.	14
Financial measures of business performance	Recall questions on the financial measures of performance, the statement of comprehensive income and statement of financial position, cash flow against profit, gearing, variance analysis with favourable and adverse variances, the limits of published accounts, and window dressing.	14
Ratio analysis: profitability, liquidity and efficiency	Recall questions on calculating and interpreting the gross, operating and net profit margins, return on capital employed, the current ratio and acid test ratio, gearing, receivable days and inventory turnover, and why a ratio should never be read on its own.	18
Non-financial measures of business performance	Recall questions on non-financial performance measures, calculating market share, capacity utilisation and labour productivity, why low utilisation raises unit costs, labour turnover, measuring customer satisfaction, the four perspectives of the balanced scorecard, and non-financial measures as early warnings.	14
Forecasting and its limits	Recall questions on what forecasting is and the decisions it informs, its advantages and disadvantages, why forecasts lose reliability over time and in fast-changing markets, presenting ranges, improving accuracy, the consequences of over-optimistic and over-cautious forecasts, and responding to falling demand.	13
Qualitative forecasting methods	Recall questions on qualitative forecasting and when to use it, structured and unstructured methods, the Delphi technique and its drawbacks, expert opinion, brainstorming and intuition, and combining qualitative with quantitative forecasts for a product with no market yet.	14
Forecasting sales, costs, profit and cash flow	Recall questions on forecasting sales volume and revenue, total costs, profit and contribution, separating fixed and variable costs, cash flow forecasts with net cash flow and closing balances, why cash and profit forecasts differ, sensitivity analysis, and responding to a forecast cash deficit.	14
Time series analysis and moving averages	Recall questions on time series analysis and its four components, calculating three-year moving averages, seasonal and cyclical variation, variations from trend, forecasting with the trend and average seasonal variation, and the limitations of time series analysis.	16
Correlation, extrapolation and index numbers	Recall questions on positive and negative correlation, the correlation coefficient from −1 to +1, why correlation does not prove causation, lines of best fit, predicting and extrapolating sales and the dangers of extrapolation, and interpreting index numbers against a base year.	13
The business decision-making process	Recall questions on the stages of structured decision making, how objectives and risk shape a choice, the level and nature of risk, forecast accuracy, volatility, optimism and confirmation bias, short- to long-term and strategic, tactical and operational decisions, and quantitative and qualitative tools.	15
Decision trees and expected values	Recall questions on decision trees, decision and chance nodes, probabilities that sum to 1, calculating expected values and net gain, rolling back a tree from right to left, the limitations of decision trees, and why an option the business cannot finance must be rejected.	16
Ansoff's matrix	Recall questions on Ansoff's matrix, its product and market axes, market penetration, product development, market development and diversification with examples, the risk of each quadrant, why businesses diversify, the limitations of the matrix, and choosing a quadrant for a shrinking core market.	16
Conflicting results from decision-making tools	Recall questions on why two decision-making tools can point opposite ways, quantitative against qualitative information, and how a business should resolve the disagreement.	13
Causes, types and barriers to change	Recall questions on internal and external causes of change, technology as a driver, catastrophic, strategic, tactical, operational, contingency, incremental, step and crisis change, the problems change creates, barriers to change including culture and finance, why employees resist, and the timing of change.	17
Change management models: Lewin, Kotter and 7-S	Recall questions on change management, Lewin's unfreeze, change and refreeze model and force field analysis, Kotter's eight steps including urgency, the guiding coalition, short-term wins and consolidating gains, and the hard and soft elements of the McKinsey 7-S model.	18
Leading change and using external consultants	Recall questions on the leader's part in managing change, how communication and participation reduce resistance, and when external consultants help or hinder.	15

Business Objectives and Strategy is 497 of the 2,384 questions in the guide.Get the guide, £8

How the guide is worked

Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.

Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.

Read the full method, the return schedule and the research behind it.