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- Help the business plan ahead
- Helps financial, production, and operational and human resource planning
- Identifying seasonal variations
- Reduce dusk of unexpected sucrose that could affect business performance
- Ensure enough stock is available when needed.

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this is looking at past sales to predict future patterns.
* Seasonal - sales measured on a monthly or weekly basis to examine the seasonal demand. example - ice cream sales will be higher in the summer
* Trend - Long term data that has been collected over a number of years, general trend of sales
* Cycle - long term data is also used to identify a relationship between demand levels and economic activity.
*Random factors - how unusual or extreme sales occur. such s weather conditions such as say it snows in July sales would go up in de ice and salt.

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- it is difficult to calculate
- discount factors could be incorrect which makes NVP inaccurate
- difficult to set discount factors far into the future, the longer into the future we go the less reliiable the discount factor

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- Allows for future earnings to be adjusted to present values
- easy to compare different projects
-Allows for impact of inflation on value of future cash flow
- Discounts can be changed to take into account changes in economic and financial climate
- Allows for effect of risk on estimated future cash flows

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-Ignores timing of the cash flow
- does not allow for effects of inflation on values of future cash flows
- Does not consider external factors that can affect cash flow

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- Shows the profitability if the project
-Includes all project cash flow
- Easy to compare to different projects
- Straight forward comparison with the use of percentages

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Method that measures the average net return every year with the costs of the investments. it is a percentage allowing straight forward comparison between the different investment options

calculating (ARR)
1. Total net cash flow (all the years added up) investment cost
2. answer from number 1 divided by total years
3. answer from number 2 divided by investment costs and then x 100
E.G
180,000 (total net cash flow) - 110,000 (investment costs) = 70,000
70,000 decided by 5 years (total amount of years) = 14,000
14,000 divided by 110,000 x 100 =12.75%

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- ignores flows of cash over the lifetime of the project
- ignores total profitability, the focus is just on the speed to which the initial outlay is repaid.

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- simple to use
- easy to calculate
- effective to use when technology is changing at a fast rate, such as hi tech projects, in order to recover the cost of investment as quickly as possible
- helps manage cash flown

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The time it takes the project to pay back the initial outlay

Example - if a project costs £20,000 and the net cash flow generated by the project is £10,000 then the pay back period is 2 years calculating years and months for payback :
(payback period between year 3 and 4)
1. total investment cost - total amount at the end of year 3 = remaining amount to pay
2. Net cash flow for year 4 divided by 12 = the monthly earning
3. remaining amount to pay decided by monthly earring = how many months it takes for the remaining amount to be gained.

E.g.
£110,000 is the investment cost
year 3 - cumlativitte cash flow = £70,000
year 4 - cumulative cash flow = £130,000

1. £110,000 - £70,000 = 40,000 (remaining to payback)
2. £60,000 (net cash flow for year 4) divided 12= £5,000
3. £40,000 (remaining amount) divided £5,000 = 8
Total payback period = 3 years 8 months

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is a technique used to evaluate planned investment by a business and measure its potential value to the business.

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Businesses will often invest money in order to meet their objectives, such as sales, growth, increase in profitability and expansion.

A business may need to invest money in order to keep up with their competitors and gain a competitive advantage.

Business invest in capital goods - goods used in the direct or indirect production, for example lorries, machinery or buildings.

investments made can be autonomous - replacing worn out goods or they can be induced - new investments.

investments can arise from developments in technology

large amounts of money are often invested in hope that this will benefit the business giving a profitable return

There is no certainty that the investment will increase profits. Business carry out research to help them decide which option is most likely to increase their profits and how long it will take them to get initial money back.

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- Working near full capacity can put pressure on quality
- Risk of exisiting customers finding out about the special orders and wanting the same price.
- Will the new customer expect and demand lower prices in the future as they have been accepted the first time.
- he new customer could challenge existing customers sales, which can influence their future orders to the business

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- Future orders may follow
- Spare capacity is used increasing capital on invested
- New order can give the business access to new markets and opportunities.
- Increasing production can have benefits in HRM - increased wages and payment of bonuses motivating employees.
- Help keep workers busy when normal orders are already dealt with.

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Factors that should be considered before agreeing or disagreeing to this 

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Factors that should be considered before agreeing or disagreeing to this 

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* Capacity - has the business got the spare capacity or is this the best way to utilise the spare capacity?
* Labour demands - would the special order be completed in normal hours or would extra hours have to be paid to workers.
*Future orders - could the special order lead to more regular order
*Existing customers - will the special order upset existing customer who pay a higher price?
*Product adjustment - Would the special order require a product slightly different to regular product? , could resulting changing production process and new materials and training workers.

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total contribution = contribution per unit x number of items sold

Example - if a clothing business receives an order for 10,000 shirts that are sold at £7.00 per shirt and variable costs per shirt are £3.00 then contribution is £4 per unit

= £4 x £10000 = £40000 total contribution

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This is to examine the value of a special order by using quantitative measure, the contribution (difference) between revenue per unit and variable costs per unit.
contribution = selling price - variable costs

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A special order can involve:
*Selling the same product lower than normals sales price
* Selling modified product at a higher price

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Sometimes businesses may receive orders for their products that differ in terms of the profile of their regular orders. This difference is often based on price paid, the quantity ordered or the lead time. These special orders can be one - off or they could be a new buyer establishing A relationship with the supplier. The decision to accept a special order depends upon the potential immediate and future quantitative and qualitative benefits that results from the order.

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SMART objectives also enable feedback and learning within the organisation, so that management can monitor achievement and make changes where necessary. One final point to not when setting SMART objectives is to check whether an objective had been well formulated, so those setting objectives should allayed ask: What will be acceptable evidence that we have succeeded in reaching our objective? I.E. How will a business know when it had achieved its objective.

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SMART objectives contain the potential to focus attention and gain commitment from all levels within a business agreed performance targets. They will also encourage team work, and they direct resources to where they can be most effective.

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objectives should be written using the SMART model, in order to make the clearer and more meaningful to understand and achieve:

Specific - objectives should specify what the business wants to achieve. They should be clear so that all stakeholders understand what the objective is.

Measurable - objectives should be measured to make sure the objective has been achieved. This measurement should be numeric.

Achievable - are the objectives achievable? there is no point in setting an unrealistic target, this can be demotivating.

Realistic - Is the business likely to achieve the objectives with the resources available?

Time limited and constrained - a timescale needs to be set for achieving the objectives.

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There are businesses that will try to minimise the impact of their business activities on the environment and consider the needs of society. Businesses may try to ensure suppliers in developing countries have fair working conditions; ensure employees are earring a fair wage and sourcing raw materials from sustainable sources. This objective may come at a cost though in terms of lower profits for the business. However, modern businesses have to be respectful of the wider community and take their social and environmental responsibilities seriously.

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This is measured by the amount of dividend paid to shareholders and any increases in share price. This objective is concerned with increasing the price of the businesses shares on the stock market. In addition, many senior managers have bonus schemes related to increasing share prices and dividends so they may also have an interest in increasing shareholder value.

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Some businesses will spend money to gain customers, reducing profits in the short run, but hopefully increasing profits in the longer term. They may even be able to force other competitors out of the market, by using short run, loss making pricing strategies.
Growth is often based on reinvesting profits, reducing short term return to owners but leading to grater market dominance in the longer term that can lead to greater profit margins.

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This Is the objective of most businesses, especially those operating in the private sector (partnerships, sole traders). Profitability can be measured in a number of ways. These measures of profitability include gross profit, gross profit margin, net profit and net profit margin as well as return on capital employed (all in chapter 4). Long term increases in profitability, linked to increasing shareholder value, will be the main factors that create on-going motivation in business owners and managers. Profits can be maximised through increasing revenues and/or reducing costs.

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Around 30% of businesses fail within 2 years of being set up, and in some industries this figure is much higher. For a small business, the initial objectives is to survive the difficult time of gaining customers, establishing a good local name and building a reputation.

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Business aims and objectives can be grouped into the following main categories: 

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Business aims and objectives can be grouped into the following main categories: 

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- Survival
- Profit maximisation
- Sales maximisation
- Growth
- Increase shareholder value
- Corporate social responsibility/ Environmental/Ethics

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Add up a quarter, divide by three, repeat for the other three quarters

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Developing new products for new markets.

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*simle yet effective
*present data in an attractive way

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Business objectives are more specific and measurable the business will set to achieve its aims.

A business may have an aim to increase sales and revenue and will set a number of sales targets (objectives) in order to achieve the aim.

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Business aims are what the business wants to achieve in the future and they tend to be quite generic and broad. They set out the goals for the business.

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The Ansoff Matrix is a strategic tool used by businesses to achieve growth.
The Ansoff Matrix allows the business to view their product portfolio and consider various ways to increase profitability or revenue.
the Ansoff Matrix helps the business determine their strategy.
The four options indicate how to manage the development of the product range by looking at options according to 'products' and 'Markets'.

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Developing new products for new markets.
Often attempted if a business sees a new oppurtunity and has funds available.
A business may have no option but this because of pressures in existing markets or on existing product ranges.
Greatest level of risk - Changes in both the market and product.

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Developing new products for existing markets.
Creating new products that are simular to existing products.

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Finding and developing new markets for existing products

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Concentrating on exisiting products in existing markets

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Mission statements tend to be vague and often express an aspiration or ambition rather than a reality. the job of the organisation is to try its hardest to turn aspiration into reality over a period of time.

Some people may argue that mission statements are unrealistic and can never be achieved, but in a way that does not matter. At least to have an aim, however difficult to achieve, is better than having no aim at all.

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* gives good visual represenation of the relative sizes or shares of a whole part- easier to understand
* makes data easier to compare.
* can be used to show market income and markey share.
x not very effective for showng increases or decreses of proportions over tie
x do not show casual relationships between data

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One axis shows the catagories being compared and the other will show the frequency
*allow data to be presented clearly
* easy to analyse the data
* useful to summarise large amounts of data
x they can oversimplify data

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Visually similar to bar charts (but has no gaps between the bars). the difference is that histograms show qualitative data and bar charts tend to show categorical data
* good when displaying data which has chronological categories or numerical groupings
x can't be used for exact values as the data is grouped into intervals
x the effectiveness of data decreases then the range of data is too wide

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used to compare two variables. the x-axis represents a continuous variable and the y-axis represents the second variable (quantity or value)
* clear and raises questions
* can present data from a number of different categories

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- Helps to ensure that all stakeholders are clear on the purpose of the business so everyone can be focused on the same goals and objectives
- Helps with the strategic planning since this should be the starting point.
- Gives some transparence for investors, they understand how their capital will be put to use
- Helps customers understand the ethics and objectives of a company

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An organisations mission statement is a broad statement of its aims and values. It will guide the everyday operations and decision-making of the business.

The mission statement is sometimes seen as a crucial in the strategic planning of a business organisation. The mission statement can be the foundation stone of an overall strategy and then followed through into the development of more specific functional strategies. By defining a mission and organisation is making a clear statement of its purpose.

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If a business raises the price of a product, the quantity demanded by its customers will generally fall. If they lower the price of the product the quantity demanded will rise.

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Bee Business Bee Critical Path Analysis (CPA)

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Join BeeBusinessBee in this tutorial looking at the Business Studies concept of Critical Path Analysis (CPA). This is a concept that you should be able to understand for your A2 Level Business course and the AQA BUSS3 exam. This tutorial covers the key concepts and takes you through a worked example.

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*Delphi technique
*Brainstorming
*Intuition
*Expert opinion

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- A clear vision can give the business a clear identity and ethos.
- Can help in setting objectives and support the business strategy.
- Focus senior managers on the tasks to achieve the vision.
- Communications to employees how they can contribute and can improve employee engagement.
- Commits resources to ac

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Market analysis is concerned with collecting and interpreting data about customers and the market so that businesses adopt a relevant marketing strategy.

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This is based on numerical information that can be statistically analysed. This allows businesses to answer questions such as:
* what are the demographics of the target market?
* what segments exist within the target market?

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*Time series analysis
*Use of market research data

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A vision statement is a description of what a business sets out to achieve in the medium to long term.

The vision statement should provide a clear guide to senior management of the future direction of the business and help to direct strategic decision - making across the business.

Vision statement will differ in style and length. There is no set way of writing vision statements, however they should all have the same purpose of defining the core values and direction the business is heading.

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This is information about decisions based on emotions, feelings, opinions and motives. This allows businesses to answer questions such as:
* what are customers' motivations when purchasing a product?
* what are customers' views on competitor products?