2016 Suite

Cambridge TECHNICALS LEVEL 3

BUSINESS
Unit 1
The business environment
A/507/8148
Guided learning hours: 120
Version 3 Opportunities for applying learning
across units updated - August 2016

ocr.org.uk/business
 First teaching September 2016

LEVEL 3

UNIT 1: The business environment

A/507/8148

Guided learning hours: 120

Essential resources required for this unit: None

This unit is externally assessed by an OCR set and marked examination.

UNIT AIM
Businesses operate in an environment which is dynamic, competitive, uncertain and frequently
hostile. They need to constantly adapt to changes in their internal and external environments in
order to be successful. These changes may include anticipating the actions of competitors,
reacting to economic or political changes or making use of new technologies. Whether you aspire
to be a business professional, manager, charity worker or entrepreneur, understanding the
business environment is key to ensuring that the business in which you work reaches its full
potential.

In this unit you will develop an understanding of how and why businesses operate in the way they
do. You will look at a range of different types of business and business structures, and explore how
the ownership of a business and its objectives are interrelated. You will learn about the importance
of different functions within a business and how they work together. You will understand the legal,
financial, ethical and resource constraints under which a business must operate and how these
can affect business behaviour. You will explore ways in which businesses respond to changes in
their economic, social and technological environment, and the necessity for a business to plan.
You will appreciate the influence different stakeholders can have on a business, and you will learn
how to assess business performance.

The knowledge, skills and understanding gained by completing this unit is fundamental to being
effective in business and, therefore, has synoptic links to all of the other units in the OCR Level 3
Cambridge Technical in Business suite of qualifications.

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TEACHING CONTENT
The teaching content in every unit states what has to be taught to ensure that learners are able to access the highest grades.

Anything which follows an i.e. details what must be taught as part of that area of content. Anything which follows an e.g. is illustrative.

For externally assessed units, where the content contains i.e. and e.g. under specific areas of content, the following rules will be adhered to when we set
questions for an exam:

• a direct question may be asked about unit content which follows an i.e.
• where unit content is shown as an e.g. a direct question will not be asked about that example.

Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

1. Understand different types 1.1 different types of business activity, i.e. 1.1 To include purposes, key features and examples of
of businesses and their • primary each type.
objectives
• secondary
• tertiary

1.2 different sectors of operation, i.e. 1.2 To include key features and examples for each
• private sector.
• public
• third sector

1.3 different forms of legal business ownership, i.e. 1.3 To include advantages and disadvantages of each
• sole trader form of legal ownership and the most appropriate
form of ownership for a particular business.
• partnership
• private limited company
• public limited company
• state/government owned
• charity/not-for-profit

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Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

• community interest companies (CIC)

1.4 factors which inform business ownership, i.e. 1.4 To include the most appropriate form of legal
• legal status ownership for a particular business.
• liability
• funding
• control/decision making
• legal/administrative requirements

1.5 To include the appropriateness of the objectives of a

1.5 differing business aims and objectives, i.e.
business.
• survival
• financial, i.e.
o break-even
o increase revenue
o reduce cost
o make profit
• growth, i.e.
o physical expansion
o increase in market share
o increase provision
• reputation (e.g. quality, offering value for money,
being ethical, social responsibility, being
environmentally friendly)
• being enterprising (e.g. own boss, pursue own
interests, being competitive)

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Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

2. Understand how the 2.1 key tasks of functional areas of businesses, i.e. 2.1 Different businesses may have different names for
functional areas of • finance some of these functions, for example, Finance may
businesses work together • marketing be called Accounting, Business Support Services
to support the activities of may be called IT or Administration, HR may be called
businesses • sales Personnel and Operations Management may be
• human resources (HR) known as Production.
• operations management
• customer services The tasks should be limited to the key activities:
• business support services • finance – financial control and record keeping
• research and development • marketing – promoting the business using
• purchasing/procurement different and relevant forms of media, including
social media
• sales – selling business products/services
• human resources (HR) – planning recruitment,
redundancies, remuneration and reward systems
• operations management – converting inputs to
outputs
• customer services – liaising with customers,
managing expectations and resolving queries
• business support service – managing resources,
maintaining equipment, providing IT support,
providing administrative support
• research and development – developing new
products and services in response to research
findings
• purchasing/procurement – sourcing and providing
materials or services.

2.2 how business functions interrelate with other business 2.2 To include the consequences of poor
functions interrelationships between business functions.

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Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

For example, the actions of the sales function may
impact on the operations management function if output
needs to be increased. If the sales function fails to inform
the operations management function of the likely
increase in sales, there may be insufficient products to
sell.
3. Understand the effect of 3.1 different organisational structures, i.e. 3.1 To include organisation by function, product/service,
different organisational • flat structures geographic location.
structures on how • hierarchical/tall structures
businesses operate
• centralised
• decentralised
• matrix

3.2 elements of organisational structures, i.e. 3.2 Division of work in large organisations, subtasks are
• division of work often distributed to functional areas such as
• span of control operations management, finance, or marketing.
• chain of command

3.3 how the elements of the organisational structures 3.3 Implications include:
impact on businesses operations, i.e. • authority can be delegated; responsibility cannot.
• communication paths • span of control may increase if chain of command
• accountability, authority and responsibility is shorter or a flat structure is adopted.
• delegation
• empowerment To include the advantages and disadvantages of
different organisational structures.

To include the appropriateness of an organisational

structure for a business.

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Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

3.4 the use of organisation charts to show: 3.4 To include reporting status (upwards) and command
• elements of the organisational structure status (downwards). To include an awareness of the
• the status of different levels of job role, i.e. key tasks associated with each job role.
o chief executive
o directors
o managers
o supervisors
o assistants/operatives
4. Be able to use financial 4.1 what is meant by the terms: 4.1 To include definitions and examples.
information to check the • cost (including fixed and variable costs)
financial health of Learners should understand the difference between
• revenue
businesses revenue, profit and cash flow.
• cash flow
• net cash flow
• profit
• break-even
• margin of safety

4.2 how to calculate: 4.2 Profit = revenue – cost

• profit/loss Break-even output = fixed costs/(selling price –
variable cost)
• break-even point/output
Graphical analysis is not required.
4.3 how to interpret financial statements, i.e. 4.3 To include description of components in financial
• an income statement statements and analysis of data.
• a statement of financial position
• a cash flow statement A cash flow statement is a record of actual cash
inflows and outflows, whereas a cash flow forecast is
• a cash flow forecast
a prediction.

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Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

Interpretation of statement of financial position would
be limited to a comparison between different time
periods.

To include recommendations for future success.

5. Understand the relationship 5.1 who the main stakeholders are, i.e. 5.1 A stakeholder is any person, group or organisation
between businesses and • internal stakeholders which has an interest in a business because they are
stakeholders affected by, or may be affected by, the activities of
• external stakeholders
that business.
and their objectives
Internal stakeholders include owners (sole trader,
partners), employees (e.g. chief executive, directors,
managers, supervisors, assistants), and trade unions.

To include external stakeholder groups such as

shareholders, customers, suppliers, potential
investors, lenders, local community, pressure groups,
and central and local government (e.g. HM Revenue
& Customs (HMRC), environmental health, planning
department).

To include internal and external stakeholder

objectives; for example, employees’ objectives may
include job security, pay and benefits, rewards and
recognition.

5.2 the ways in which different stakeholder groups attempt 5.2 Consider practical examples from real businesses,
to alter business behaviour (e.g. an environmental pressure group could protest
about the expansion plans of a business, causing
negative media publicity and a customer boycott or
denial of planning permission).

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Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

5.3 how businesses respond to the different and sometimes 5.3 Business response includes:
conflicting objectives of different stakeholders • the degree of influence individual stakeholders
possess is likely to determine how businesses
respond to the individual stakeholder’s objectives
• conflict resolution and conflict management of
stakeholder objectives
• the benefits and drawbacks of meeting
stakeholder needs.

5.4 the consequences to a business of not listening to its 5.4 Including not listening to specific stakeholder groups
stakeholders or a specific stakeholder (e.g. local residents or the
business owner).
6. Understand the external 6.1 the factors which comprise the external business 6.1 To include:
influences and constraints environment, i.e. • social factors such as demographic issues,
on businesses and how • social factors attitudes to work, disposable income, social
businesses could respond
• technological factors trends, cultural beliefs
• economic factors, i.e. • technological factors such as automation,
o interest rates communication, purchasing/sales, mobile
o exchange rates • environmental factors such as energy
management, carbon emissions, waste reduction,
o inflation
recycling, pollution
o unemployment
• political factors such as political instability, change
o taxation of government, government initiatives.
• environmental factors • legal factors to include purpose and main
• political factors provisions of itemised legislation. By current
• legal factors, i.e. legislation we mean the legislation specified or its
o the impact of current legislation on business equivalent should it be revised during the lifetime
operations, i.e. of the qualifications in which this unit is taught.
 Business framework, i.e.

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Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

• Companies Act
• Partnership Act The implication of failing to meet legal
 Consumer protection, i.e. requirements to include legal (e.g. fine) and non-
• Sale and Supply of Goods Act legal implications (e.g. effect on reputation).
• Supply of Goods and Services Act
• Consumer Protection Act
 Employee protection, i.e.
• Equality Act
• Health and Safety at Work Act
• Working Time Directive
• National Minimum Wage Act
 Data Protection Act
 Copyright, Designs and Patents Act
 Planning permission
o the implications of a business failing to meet legal
requirements
• ethical factors, i.e. • ethical to be taken to mean doing what is morally
right, by acting above and beyond what the law
o ways in which a business can act ethically, i.e.
requires. To include ways in which a specific
 as an employer (e.g. not exploiting workforce, business can improve its ethical profile (e.g. a
no child labour, pay above minimum wage, restaurant could buy fair trade products).
living wage, fair working practices)
To include both positive and negative impacts of a
 as a trader (e.g. fair trade, fair prices)
business operating in an ethical manner.
 environmentally friendly (e.g. waste
To include both positive and negative impacts of a
management, recycling, carbon emissions,
business not operating in an ethical manner.
transport miles, energy use)
 sustainability (e.g. fossil fuels, land
management, green energy)
 corporate social responsibility activities (e.g.
charity donations, humanitarian aid, health and
welfare schemes, sponsorship of
sport/educational/ cultural events)
o the impact on a business and its stakeholders of

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Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

operating ethically
o the consequences for a business and its • competitive factors such as the strength of
stakeholders of not operating ethically competition, market share of business and
• competitor factors competitors, competitor behaviour and position in
market.

6.2 to identify how the external environment can impact on 6.2 To include positive and negative impacts on a
a business and its stakeholders business and its stakeholders.

6.3 how businesses can respond to changes in their 6.3 To include the advantages and disadvantages of
external environment differing responses, including seizing opportunities
and dealing with threats.
7. Understand why 7.1 why businesses plan, i.e. 7.1 Survival to include why businesses fail (e.g. flawed
businesses plan • to survive/avoid business failure business plans, poor financial control, lack of
• to develop business ideas knowledge of market and competition, lack of clear
unique selling point, concentration risk (e.g. relying
o where business ideas come from (e.g. problem
on one major customer))
solving, innovation or accidental discovery, from
employees, inventors, entrepreneurs)
Attitude to risk (e.g. willingness to take risk, risk
• to avoid unnecessary risk
averse).
o attitude to risk and uncertainty
• to meet objectives

7.2 to determine appropriate sources of finance for 7.2 To include the need for internal and external sources
businesses, i.e. of finance, short and long-term sources, the
• savings advantages and disadvantages of each source, and
• reserves their appropriateness to a specific business.
• overdraft
• loan
• mortgage

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Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

• credit card
• hire purchase
• trade credit
• venture capitalist
• share issue
• crowd-funding

7.3 what may be included in a business plan, i.e. 7.3 To include what a business plan can be used for and
• identification of a product or service who may wish to see one.
• the unique selling point
• how to protect a product/service
• prioritisation of business objectives
• results of market research that has been carried out
including competitor analysis
• identification of financial requirements (e.g. cash
flow forecast, the sources of finance to approach)
• identification of resource requirements (e.g. finance,
number of employees, skills of employees, premises
requirements and location)
8. Be able to assess the 8.1 factors affecting the success/failure of a business, i.e. 8.1 To include past and present success/failure.
performance of businesses • financial
to inform future business
• non-financial
activities
• short-term
• long-term

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Learning outcomes Teaching content Exemplification

The Learner will: Learners must be taught:

8.2 how to conduct a SWOT (Strengths, Weaknesses, 8.2 SWOT assesses a business’ current position.
Opportunities and Threats) analysis Strengths and weaknesses are internal and within a
business’ control. Opportunities and threats are
external; they need to be managed as they cannot be
controlled.
8.3 how to interpret business performance, i.e.
8.3 To include both assessment of the current
• financial analysis
performance of a business against its past
• assessment of non-financial data performance and assessing various measurements of
• comparison with organisational objectives its current performance. Industrial averages could
• comparison with industrial averages include benchmarking.
• comparison with similar businesses
• trends over time
• methods used to improve business performance Methods used to improve business performance should
include making specific recommendations for future
business objectives.

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LEARNING OUTCOME (LO) WEIGHTINGS

Each learning outcome in this unit has been given a percentage weighting. This reflects the size and demand of the content you need to cover and its
contribution to the overall understanding of this unit. See table below:

LO1 6-24%

LO2 3-14%

LO3 6-17%

LO4 6-17%

LO5 6-17%

LO6 6-17%

LO7 3-14%

LO8 3-14%

ASSESSMENT GUIDANCE
All Learning Outcomes are assessed through an externally set written examination paper worth a maximum of 90 marks and 2 hours in duration.

The assessment comprises:

• multiple choice questions
• short answer questions to which responses should be based on businesses that learners have researched. The research brief will be pre-issued.
• short answer and extended answer questions based on a given business scenario. Some of the questions will require the skills of analysis and
evaluation.

Please note in relation to LO6 by current legislation we mean the legislation specified or its equivalent should it be revised during the lifetime of the
qualifications in which this unit is taught.

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SYNOPTIC ASSESSMENT
It will be possible for learners to make connections between other units over and above the unit containing the key tasks for synoptic assessment, please see
section 6 of the centre handbook for more detail.

*OPPORTUNITIES FOR APPLYING LEARNING ACROSS UNITS

This identifies opportunities for developing links between teaching and learning with other units in the business suite.

Name of other unit and related LO This unit and specified LO

Unit 2 Working in business LO3 Understand the effect of different organisational structures on how
LO1 Understand protocols to be followed when working in business businesses operate
LO5 Understand how to communicate effectively with stakeholders LO5 Understand the relationship between businesses and stakeholders
Unit 3 Business decisions LO6 Understand the external influences and constraints on businesses and
LO1 Understand factors to be taken into account when making business how businesses could respond
decisions LO7 Understand why businesses plan
LO2 Be able to use financial date to inform business decisions LO8 Be able to assess the performance of businesses to inform future
LO6 Be able to use information to make and justify business decisions business activities
Unit 4 Customers and communication LO1 Understand different types of businesses and their objectives
LO1 Understand who customers are and their importance to business LO6 Understand the external influences and constraints on businesses and
LO5 Know the constraints and issues which affect the sharing, storing and how businesses could respond
use of information for business communications
Unit 5 Marketing and market research LO2 Understand how the functional areas of businesses work together to
LO2 Know the constraints on marketing support the activities of businesses
LO7 Understand why businesses plan
Unit 6 Marketing strategy LO1 Understand different types of businesses and their objectives
LO1 Understand the purpose of marketing strategies LO6 Understand the external influences and constraints on businesses and
LO2 Understand factors influencing marketing strategies how businesses could respond
LO5 Be able to use business tools to propose marketing strategies LO8 Be able to assess the performance of businesses to inform future
business activities
Unit 7 Marketing campaign LO6 Understand the external influences and constraints on businesses and
LO1 Understand the purpose of marketing campaigns how businesses could respond

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Name of other unit and related LO This unit and specified LO

Unit 8 Introduction to human resources LO2 Understand how the functional areas of businesses work together to
LO1 Know the factors that are involved in human resources planning support the activities of businesses
LO5 Understand the importance of confidentiality within the human LO6 Understand the external influences and constraints on businesses and
resources function how businesses could respond
Unit 9 Human resources LO6 Understand the external influences and constraints on businesses and
LO1 Understand the responsibilities of the human resources function and how businesses could respond
the factors that affect it
Unit 10 Economics for business LO2 Understand how the functional areas of businesses work together to
LO2 Understand how macroeconomic factors can impact on UK support the activities of businesses
businesses LO6 Understand the external influences and constraints on businesses and
LO3 Understand how UK government policies can impact on UK how businesses could respond
businesses
LO5 Understand how businesses might respond to changes in the local,
national and international economic environment
Unit 11 Accounting concepts LO2 Understand how the functional areas of businesses work together to
LO1 Understand why businesses keep accurate accounting records support the activities of businesses
LO4 Be able to use financial information to check the financial health of
businesses
Unit 12 Financial accounting LO4 Be able to use financial information to check the financial health of
LO2 Understand the reporting requirements of private limited companies businesses
and public limited companies
Unit 13 Management accounting LO4 Be able to use financial information to check the financial health of
LO5 Be able to prepare and use cash flow forecasts businesses
Unit 14 Resource management LO2 Understand how the functional areas of businesses work together to
LO1 Understand how businesses obtain and manage physical resources support the activities of businesses
LO2 Understand factors that influence how physical resources are managed LO6 Understand the external influences and constraints on businesses and
by businesses how businesses could respond
LO3 Understand how resource management can contribute to business LO7 Understand why businesses plan
performance
Unit 15 Change management LO6 Understand the external influences and constraints on businesses and
LO3 Be able to plan for change, manage change and overcome barriers how businesses could respond

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Name of other unit and related LO This unit and specified LO

Unit 16 Principles of project management LO2 Understand the relationship between businesses and stakeholders
LO3 Understand how and why projects are monitored and factors that
influence a project
Unit 17 Responsible business practices LO5 Understand the relationship between businesses and stakeholders
LO1 Understand how business act responsibly LO6 Understand the external influences and constraints on businesses and
LO2 Understand the importance of adopting responsible business practices how businesses could respond
Unit 18 Business operations LO2 Understand how the functional areas of businesses work together to
LO1 Understand how business decisions influence business operations support the activities of businesses
LO5 Understand how business operations comply with legislation LO6 Understand the external influences and constraints on businesses and
how businesses could respond
Unit 19 International business LO6 Understand the external influences and constraints on businesses and
LO2 Understand the opportunities and challenges that businesses face how businesses could respond
when operating internationally
Unit 20 Business events LO2 Understand how the functional areas of businesses work together to
LO1 Be able to prepare for a business event support the activities of businesses.
LO3 Be able to review a business event LO5 Understand the relationship between businesses and stakeholders
LO8 Be able to assess the performance of businesses to be able to inform
future business activities
Unit 21 Being entrepreneurial - evaluating viable opportunities LO7 Understand why businesses plan
LO4 Be able to evaluate the viability of opportunities
Unit 22- Delivering a business project LO2 Understand how the functional areas of businesses work together to
LO1 Be able to scope a project support the activities of businesses.
LO2 Be able to collaborate to deliver a project LO5 Understand the relationship between businesses and stakeholders
LO3 Be able to evaluate the effectiveness of the project against its LO8 Be able to assess the performance of businesses to be able to inform
objectives and own contribution towards the project future business activities

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