Edexcel Business Studies A level
Unit 4a Revision Pack
Unit 4a Making Business Decisions
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How to revise
Use your own notes as your basis for revision.
I have used a number of examples in this pack that you would not
be expected to know about. The syllabus does not require that you
learn any specific examples.
If you don’t understand any of the concepts, use your own notes,
or textbooks, or teachers, or friends to improve your
understanding.
Don’t forget that knowledge of the concepts is only part of what
you are tested on. Application, Analysis and Evaluation are all
equally important. The comments given in this pack provide some
examples of how the basic content might be extended to provide
application and analysis.
4.3.1a Corporate objectives & strategy
This section of Unit 4a looks at how businesses arrive at their
targets (i.e. their objectives), and how the ways in which they
operate and their broad strategies help them to achieve those
targets. The specification covers the following sub-sections:
1. Corporate objectives
2. Shareholder influences on corporate objectives
3. Corporate culture
4. Corporate strategy
4.3.1a(1) Corporate objectives
Q1: What is a corporation?
A: Another name for a limited company or large public sector
organisation.
Comment: For example, the tax paid by limited companies
on their profits is known as ‘corporation tax’. And local
governments are sometimes referred to as corporations e.g.
City of London Corporation.
4.3.1a(1) Corporate objectives
Q2: What is a mission statement?
A: A brief explanation of the ultimate purpose of a company.
Comment: The use of the term ‘mission statement’ is an example
of businesses using the language of religion. Simply making money
is not enough to keep most people motivated, so businesses seek to
convey a higher purpose.
4.3.1a(1) Corporate objectives
Q3: How are mission statements (or vision statements)
constructed?
A: Normally by focussing on the customer and the values lying
behind the product range.
Comment: E.g. Starbucks, “to inspire and nurture the
human spirit – one person, one cup and one neighbourhood
at a time.” Google aims to “organise the world’s information,
and make it universally accessible & useful.”
4.3.1a(1) Corporate objectives
Q.4 What makes a good mission statement?
A: One that focuses on the ultimate values of the company
rather than product details.
Comment: For example, the previous Starbucks mission
statement concentrates on community and the possibility
of uplifting social occasions in their stores, rather than the
coffee itself.
4.3.1a(1) Corporate objectives
Q5: How long should a mission statement be?
A: The core statement is often better if it is very short, perhaps 30
words as a maximum.
Comment: Expanded versions often explain a handful of core
values too, such as the way the company intends to treat its
stakeholders.
4.3.1a(1) Corporate objectives
Q6: What are corporate objectives?
A: These are the targets which a company will set itself, and which
will help it fulfil its mission statement.
Comment: Typically, a company will have a whole range of
corporate objectives. Some will be made public, and others will
be kept confidential so as not to give an advantage to
competitors.
4.3.1a(1) Corporate objectives
Q7: What sort of target is normally mentioned in a corporate
objective?
A: Financial targets, such as growth in profits or turnover, or
physical targets such as growth in market share, diversification,
or penetration of new markets.
Comment: While increased profit is normally the ultimate
financial aim, sometimes the best way of achieving this is to
concentrate on intermediate aims.
4.3.1a(1) Corporate objectives
Q8: Over what time period are corporate objectives normally
set?
A: Most commonly a year. However, depending on the
objective, time periods of up to five years or down to three
months, or even a month, are also used.
Comment: The usual way to achieve any objective is to break
it down into a raft of smaller objectives.
4.3.1a(1) Corporate objectives
Q9: Are ‘corporate aims’ more like mission statements or
corporate objectives?
A: Confusingly, the phrase ‘corporate aim’ is used in many
different ways, either to mean ‘mission statement’ or to mean
‘corporate objective’ or to mean ‘longer-term corporate
objective’. In this specification, it is identified with mission
statements.
Comment: Words with many similar meanings are normally
best avoided in examinations.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q 10: Who are the main groups of stakeholders in a company?
A: Shareholders, employees (including managers & directors),
customers, suppliers and the wider community.
Comment: The ‘wider community’ includes both the
immediate locality, and also more generally the government
and the taxpayer, as the company will generate tax revenue
for the government.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q11. Why do shareholders have the last word in the setting of
corporate objectives?
A: Because they are the owners of the company and therefore have
the ultimate rights over it, to keep it open or to close it, and to
develop it how they wish.
Comment: In the case of large companies, this power is exercised
through the right of shareholders to appoint the company directors
at the Annual General Meeting (AGM). The directors then set the
major corporate objectives.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q12: Do employees and suppliers share the common corporate
objective of greater turnover?
A: Generally, yes. Greater turnover leads to more orders from
suppliers, more jobs and more promotion prospects.
Comment: However, small suppliers may be discarded in favour of
bigger rivals if the companies they supply grow fast, and equally
employees may find outsiders promoted over their heads.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q13: Do employees and suppliers share the common corporate
objective of greater profit?
A: Generally, yes. A proportion of profits are often reinvested
in the company, leading to greater turnover.
Comment: However, there is a direct conflict of interest if
greater profits are achieved by cutting the prices paid to
suppliers, or the wages paid to employees.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q14: Why might directors and other senior managers be more
interested in increased turnover rather than increased profit?
A: Because of the prestige associated with running a large
company.
Comment: The remuneration package of directors is often
deliberately tied to profit (or to the company share price,
which reflects expected future profit) to give them an
incentive to focus on profit too.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q15: Why might the wider community share in the common
objectives of increased turnover and profit?
A: This will lead to greater tax revenue in the form of VAT on
sales, income tax on wages and corporation tax on profits.
Comment: Additionally, local businesses will benefit as those
wages (and perhaps profits) are spent in local shops and on
local services.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q16: In what circumstances might the interests of the wider
community conflict with those of a company?
A: If increased turnover led to external costs (i.e. adverse
consequences), such as greater traffic congestion, noise or
pollution.
Comment: In other cases, a local community might prefer to keep a
large variety of smaller, more expensive shops rather than see them
replaced by a larger, cheaper supermarket.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q17: Give examples of unethical behaviour that may increase
profit in the short-term.
A: 1. making false claims about, or concealing defects in, a
product
2. Paying suppliers later than agreed
3. Bribing employees in other companies to win contracts
4. Secretly agreeing with competitors to increase prices
5. Treating employees badly
6. Polluting the environment
4.3.1a(2) Stakeholder influences on
corporate objectives
Q18: Which of the above only increase profit until you are
discovered?
A: All of them, except the last one. Even then, it wouldn’t pay if
effective legal or social pressure could be brought to bear.
Comment: Successful economies have mechanisms in place to
ensure that wholesale, systematic cheating does not flourish.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q19: What sorts of businesses are most likely to attract companies
that are prepared to be unethical?
A: Businesses that do not rely on repeat purchases, and can therefore
conceal unethical behaviour from prospective purchasers more
easily.
Comment: This includes car sales, builders, and some internet-based
companies.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q20: Why are multinationals particularly likely to be accused of
unethical behaviour in poor countries?
A: They may be held to account in rich countries with higher
business standards, while operating in countries where certain
unethical business practices (such as bribery to win contracts) is
considered normal practice.
Comment: Multinationals face a real dilemma if operating in
locations where it is impossible to make a profit without behaving
in ways that are illegal (or considered unethical) back in their
home country.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q21: What is meant by Corporate Social Responsibility (CSR)?
A: CSR is a form of self-regulation by companies, whereby they seek
to act in an ethical way, having regard for the interests of all their
stakeholders.
Comment: CSR is also known as ‘corporate citizenship’ and
‘sustainable business’.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q22: What are some of the typical company activities
associated with CSR?
A: 1. Donations to good causes, often associated with the
business e.g. Water Aid for water companies
2. Purchases from ethical sources e.g. Fair Trade
3. Offering customers the opportunity to buy ‘carbon offsets’
e.g. for air travel
4. Various ‘green’ commitments e.g. reduction in the use of
plastic bags
5. Membership of ethical pressure groups such as Ethical
Trading Initiative (ETI)
4.3.1a(2) Stakeholder influences on
corporate objectives
Q23: Does adopting a CSR approach increase profits?
A: Probably. The image (i.e. reputation) of companies is very
important to their sales.
Comment: Almost all major UK companies feel obliged to go
along with CSR, regardless of the true depth of their
commitment to the concept.
4.3.1a(2) Stakeholder influences on
corporate objectives
Q24: What is the main criticism made of a CSR approach?
A: The main obligation of a company is to generate profits for their
shareholders. It should – so the argument goes – focus exclusively
on this. If their shareholders then want to give away some of their
dividends, that is up to them.
Comment: These criticisms are commonly made by those with a
‘free market’ approach to business.
4.3.1a(3) Corporate culture
Q25: What is organisational culture (= business culture)?
A: The collective behaviour of people who are part of the same
organisation, based on a shared set of assumptions about the world.
Comment: Large organisations may also have many different ‘subcultures’ in different workplaces and countries.
4.3.1a(3) Corporate culture
Q26: What is a strong culture?
A: A culture where employees identify wholeheartedly with
the company culture. In any situation, they know instinctively
how their company would like them to respond.
Comment: Such a company is likely to run smoothly, with
minimum need for monitoring and supervision.
4.3.1a(3) Corporate culture
Q27: What is a weak culture?
A: A culture where employees, by and large, have not identified
with the company values.
Comment: They are likely to do their own thing in new situations,
so there is a greater need for supervision and control.