AQA A Level Business

3.7.3 Analysing the existing internal

position of a business to assess
strengths and weaknesses: overall
performance
Lesson objectives
• Data may be analysed over time or in comparison with other
businesses.
• Data other than financial statements should include operations, human
resource and marketing data.
• Data may be analysed over time or in comparison with other businesses.
• The importance of core competencies
• Assessing short and long-term performance
• The value of different measures of assessing business performance
• Methods of assessing overall business performance to include:
• Kaplan and Norton’s Balanced Scorecard model
• Elkington’s Triple Bottom Line (Profit, People, Planet).
Equipment needed for this lesson
Worksheet 373
Starter - 4 quick questions for discussion
1. If competency means the ability to do something successfully, what
do you think your core competencies are?
2. What are the core competencies of McDonald’s?
3. What are the core competencies of Nike?
4. What are the core competencies of Sainsbury’s?
Data may be analysed over time or in
comparison with other businesses
Data may be analysed over time or in
comparison with other businesses
• Annual Reports for larger
companies are an excellent
source of data which a business
can use to compare itself against
• This is called benchmarking
when one business compares
itself against a similar business in
the same industry e.g. Next plc
and River Island
• Next 10 year history here
This is a 10 year historical summary published by
Next plc, does this look attractive to an investor?
Operations data
• Operations data is important as
it gives the business an idea of
capacity utilisation and
productivity
• Some of the highest costs in
manufacturing is the business
process so this is an important
area for a business to examine
the performance by looking at
the data This is operations data from Next Plc taken from
their trading statement, why is there a large dip
in March 2020?
HRM data
• Human resources data might
include:
• Recruitment cost per employee
• Punctuality %
• Job satisfaction
• Diversity statistics
• Training costs per employee
• HRM performance data would help
the department to monitor
productivity and ensure that the
business has the right staff in the
right job roles and to set the HRM
objectives for the following year
Marketing data
• Marketing measures of
performance might include:
• Costs of any promotional
campaigns
• % of repeat business
• Market share %
This can be used by the marketing
department to monitor Statement taken from the M&S annual report
performance and outcomes of any which discusses market share data and key
marketing activity and to help set trends. Who might read this report?
marketing objectives for the
following year
The importance of core competences
Core competencies
• A core competency is any area of
expertise in a business which can
contribute to added value for the
customer and is also hard to
imitate e.g. Coca Cola
• The core competency creates a
uniqueness which is distinctive to
the organisation and is better than
the competitors
• A core competence is the way the
business uses its resources to
achieve competitive advantage
Value of core competencies
• Understanding the core
competences will allow the
business to successfully grow in 3
ways:
• Facilitates strategic development:
identifying business opportunities
and resources needed e.g. Dell
• Encourages innovation: diversifying,
encouraging employees to be
creative e.g. Apple
• Enforces HRM selection processes:
recruiting staff with the key skills to
take advantage of the core
competencies e.g. Virgin
Assessing short and long-term performance
Assessing short-term performance
• A business can examine the short
term performance of a business by
looking at:
• Cash-flows actual against forecast
amounts, showing working capital
needs on a monthly basis
• Short-termism can be a problem
where managers become obsessed
with day-today issues rather than
long-term strategies
• A short term focus will see a
reduction in investment in R&D and
can mean a failure to innovate Why did Blockbusters have a short term view?
Assessing long-term performance
• With all the problems with
market crashes and companies
going out of business, managers
may need to rethink how they
measure corporate performance
• They can look at return on
capital invested and any
improvements in profitability
levels
• They could also look at growth Compile a list of UK companies that have recently
of global market share gone bust or are in administration
The value of different measures of assessing
business performance
How to measure the performance of a
business
• How do we measure how well a
business has performed?
• This could be against objectives,
were they met or exceeded?
• Against budgets were the
variances adverse or favourable
• Through business theories:
• Using the Triple Bottom line
method
• Using Kaplan and Norton’s
scorecards
Kaplan and Norton’s Balanced Scorecard
model
• The balance scorecard theory is that there
are a set of measures that will give
managers a fast and comprehensive view
of the business
• It allows managers to look at the business
from 4 important perspectives and
provides answers to 4 questions:
1. How do customers see us? (customer
perspective)
2. What must we excel at? (internal
perspective)
3. Can we continue to improve and create
value? (innovation and learning
perspective)
4. How do we look to shareholders?
(financial perspective)

AQA guidance HERE

Kaplan and Norton’s Balanced Scorecard model
Elkington’s Triple Bottom Line (Profit, People,
Planet)
• The Triple Bottom Line is widely
used by accountants and enables a
business to examine their
performance based on three
criteria; the social, environmental
and economic impact of the
business:
• People: the positive and negative
impact that a business can have on
their stakeholders e.g. customers
• Planet: the positive and negative
impact that a business can have on
the environment e.g. pollution
• Profit: the positive and negative
impact that a business has on the
local and national economy e.g. taxes AQA guidance here
Elkington’s Triple Bottom Line (Profit, People,
Planet)

An example of a business using the Triple Bottom Line John Elkington explains the Triple Bottom Line
Plenary quiz
• Triple Bottom Line (TBL) or Balanced Scorecard Model (BSM) – you decide!

1. Financial
2. Profit
3. Customer
4. People
5. Learning and growth
6. Planet
7. Internal business process
 Sample questions
These are taken from a mixture of past papers (current spec),
past papers (legacy spec) and SAM materials.
Sample question 1

Level 1 Level 2 Level 3 Level 4 Level 5

1-5 6-10 11-15 16-20 21-25
Answer question 1
Answer question 1
Case study for sample question 2
Sample question 2

L1 L2 L3 L4 L5
1-3 4-5 6 7-8 9-10
Answer question 2
Revision video
• Core competences; These are the resources and capabilities that comprise
the strategic advantages of a business which must define, cultivate, and
exploit its core competencies in order to succeed against the competition
• Benchmarking; To evaluate one business by comparing it to another
• Capacity utilisation; Extent to which a business uses its productive capacity
• Short-termism; Excessive focus on short-term results at the expense of
long-term interests
• Competitive advantage; A factor of business trade that puts a company in
a superior business position over their rivals