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Is China’s slowdown good news?

Thursday, May 15, 2014

There is plenty of concern about the slowdown in China's growth, and what this might mean for businesses looking at expansion via China. To what extent should those businesses be worried about slower growth? The issues here are very relevant to the external environment in China, and could be useful for bullet points 1 and 6:

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China’s exports losing low-cost advantages

Thursday, May 01, 2014

Boston Consulting Group have produced a fascinating new report which investigates the competitiveness of the world's top 25 goods exporting nations. Their press release highlights significant changes in the world order over the last decade. The newly-minted BCG Global Manufacturing Cost-Competitiveness Index incorporates four factors: energy costs, productivity, wages and exchange rates. That analysis shows that Mexico now has lower manufacturing costs than China, while Brazil is now one of the highest-cost countries, and the UK is the cheapest location in western Europe.


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Macroeconomic moves in China

Friday, March 28, 2014

I am cross-posting this from the Economics blog as I think it should be useful for BUSS4 students; in a rather low key report on the BBC website this week, I found the shock news that China had a trade deficit of $23bn in February. This is alongside the HSBC Purchasing Managers’ Index (PMI) which focuses on small privately owned businesses, and which gave a reading of 48.1 for March, compared to 48.5 in February - with any figure below 50 indicating a contraction in manufacturing activity. And today there is a forecast of the ‘official’ PMI, which looks at the larger state-owned factories; although this is slightly over the ‘expansion’ measure of 50, it is only predicted to come in at 50.3 - and is subject to a 0.3 downwards correction to allow for seasonal patterns, according to Louis Kuijs, chief China economist at the Royal Bank of Scotland.


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Alibaba - Ali you need know!

Sunday, March 23, 2014

A combination of excellent news articles from last week have helped my students and I to fully understand the size and scope of Alibaba. Former teacher (and self-confessed technophobe) Jack Ma’s online company has experienced exponential growth and led to fear and envy from some of China’s (and the world’s) biggest companies. However, in his modesty he has described himself as “a blind man riding on a blind tiger”, giving him instant legend-status in our eyes!

The attached presentation has videos, hyperlinks and infographics that allow students to focus on the various elements that have led to Alibaba’s potential $150bn valuation. Each slide focuses on a different section from the BUSS4 specification thus giving information on leadership, strategy, competition, diversification and the economic (electronic) environment.

Hope it helps.

Does the UK Steel Industry Have a Future?

Tuesday, March 18, 2014

The FT produce some superb videos that are ideal for use in the Business & Economics classroom - and this new one on the UK steel industry is yet another ideal teaching resource. 

While global steel output has accelerated over the past four decades, the UK has been left behind. Tanya Powley, the FT's manufacturing correspondent, visits Celsa's plant in Cardiff to find out if UK steelmakers still have a future.

There is so much in the four minutes of the video. A good idea is to ask students to consider, as they watch, what is the most significant point made about the UK steel industry. 

They might mention:

The substantial reduction in scale of the industry over recent decades (from 200K workers to around 20k)

The significant overcapacity in the global steel industry

The lack of competitiveness of UK steel plants despite heavy investment (capital intensive!)

The changing relationship between employers and employees (the steel industry at its height had a pretty awful record of industrial relations)

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China – has the “domino effect” begun?

Wednesday, March 12, 2014

Speaking at his annual address to parliament, premier Li Keqiang said “we are at a critical juncture where our path upwards is very steep… deep-seated problems are surfacing; painful structural adjustments need to be made”.

This comes at a time when there are reports of a potential sub-prime debt crisis in the “shadow banking” sector (worth between $604bn - $3.7 trillion, depending on the source).

Also, according to the Ministry of Human Resources, the number of job openings fell, with city jobs in Q4 falling 13.7% from the preceding quarter.

Finally, and perhaps most importantly, the first domestic corporate bond default happened last week. Energy company Shanghai Chaori Solar failed on a £9m interest payment. The state has previously bailed out Chaori and other such businesses, but chose not to this time, generating much speculation from analysts.

Many say it was a necessary move from the government to install a better risk culture, tackle China’s credit problems and starting with the “painful adjustments” necessary to decelerate growth.

However, Bank of America Merrill Lynch stated “We doubt that the financial system in China will experience a liquidity crunch immediately because of this default, but we think the chain reaction will probably start.”

This was echoed by Philip Li of China’s International Credit Rating, calling it “a domino effect”, and coupled with Robert Peston’s recent BBC article (and other sources below), should help students construct a strong case that the risks of operating in China now outweigh the rewards.

The Sunday Times - China faces it's Shadow Banks

Business Week - How Chaori will deal with the default

Forbes - Trouble for China?

The Telegraph - The value of the shadow banks

BBC - Is the shadow banking sector due to fall?

BBC - Robert Peston's How China fooled the world

Even St Anthony can’t change the culture at Barclays

Monday, March 10, 2014

In 2012 Anthony Jenkins (nicknamed “Saint Anthony”) succeeded Bob Diamond and promised to clean up Barclays and eradicate the worst excesses of the banking industry. Speaking to those who received huge bonuses for unscrupulous behaviour, he said “my message is simple: Barclays is not the place for you. The rules have changed. You won’t feel comfortable at Barclays and, to be frank, we won’t feel comfortable with you as colleagues”.

Despite this, profit dropping 32% to £5.2bn, and making 3,700 jobs cuts last year:

  • Jenkin’s himself pocketed just under £5m in shares
  • Staff paid over £1m increased from 428 to 481.
  • The bonus pool increased 10% to 2.4b

The justification for this? Many senior traders have left, or threatened to do so, and to keep hold of the top earners, he had to offer top pay. Had he not, the investment wing of Barclays would have plunged into a “death spiral”, with staff and high-value customers going elsewhere.

This is part of the bigger issue regarding European Commission’s rule to reduce banking bonuses, how George Osborne is fighting the decision and why, it would seem, he really didn’t need to as bosses of RBS (81% owned by tax payers) and HSBC also side-stepped the rule by giving large “fixed pay allowances” in the form of shares.

This story always provides great impetus for emotive debate on BUSS4 topics such as government intervention, culture, pay and leadership.

The Slowing Chinese Economy - Rebalancing Has Implications

Wednesday, February 19, 2014

The rate at which China's economy has grown in recent years (as measured by the growth in GDP) is slowing. China's economy is still growing - but slower - and this has significant implications for both domestic and overseas businesses in China as well as the rest of the world trading with China.

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Wages Vs Inflation

Thursday, December 12, 2013

Data published today by the Office for National Statistics once again shows that earnings have not risen above the rate of inlfation for the 5th year running.

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Marvin Gaye Introduces Macro Economics

Monday, November 18, 2013

A musical starter that introduces most elements of economic environment... in the funkiest way possible!

Marvin Gaye's Inner City Blues Video

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Rising Wages in China: Causes and Consequences

Sunday, November 03, 2013

Wages are rising fast in China – many economists believe that China has hit a stage in its development at which demand for labour starts to grow faster than supply, creating labour shortages and pushing up the price of labour (something economists refer to as a Lewis Turning Point).

Why is this and what are some of the key business implications?

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China’s Rebalancing Act - A Balanced China is a Slower China

We used the FT video below during our recent CPD days on China and it is an excellent introduction to a core issue for students looking at the opportunities and threats for businesses looking to trade with and in China.

China's stunning record of economic growth has largely been driven by investment and exports. In particular, following the global economic slowdown in 2007-10, China responded by accelerating investment in infrastructure projects and the programme of mass urbanisation which has created the largest human migration in history.

A consequence of this approach is that China's economic growth can be said to have been "unbalanced", with the economy over-reliant on investment spending which cannot be sustained indefinitely.

China is now looking to "rebalance". That's a key term that I fully expect to feature in strong essays written by AQA BUSS4 students in 2014.

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BUSS4 China - Osborne and Johnson in China

Tuesday, October 15, 2013

With the high-profile visits of George Osborne and Boris Johnson to China this week, there is a glut of resources available on the BBC website which could be very valuable to BUSS4 research.

Here are links to just a selection:

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Innovation Innovation Innovation

Friday, October 11, 2013

Innovation turns business markets upside down, it alters the price and use of resources, it creates and destroys revenue flows and profitability as well as the way we work.

Peter Day a former BBC presenter considers a significant changes in a BBC Radio 4 series this weekend. Consider how the internet, search engines and 3D printing or additive manufacturing might alter market production processes, job opportunities marketing and economies.

There is much to discover and discuss in his superb introductory article linked above. The broadcasts are linked here.

How recent Waitrose and ALDI location decisions give a good marketing insight

Tuesday, July 09, 2013

John Lewis are opening a store at Heathrow terminal 2, which will be the Partnership's smallest store, the first away from town and city centres and an important step in their international strategy. For a while I’ve been looking at the idea of place in the John Lewis marketing mix, and the business has clearly identified deeper trends in retail location.

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Low cost airlines

Friday, June 21, 2013

Excellent BBC2 business documentary last night on the growth of low cost airlines 'Flights and Fights: Inside the Low Cost Airlines'. The programme explores how Ryanair and Easyjet have transformed the European airline industry.

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Business response to the economic environment: zero hours contracts

Saturday, May 18, 2013

From the employer's point of view, a zero hours contract is a great example of the benefits of the flexible labour market. They allow the employer to change the number of hours an employee works each week, with more shifts offered when they are busy, and fewer when they are not; costs can therefore be controlled and matched more exactly to revenue. They are particularly popular with the fast food outlets like McDonalds and Subway, and high street chains like Boots and Sports Direct. Those employers draw heavily on the younger end of the labour market, with many of their staff being students who are looking for flexible shifts that work around their study hours; for them a zero hours contract may work well. However it is also important to consider whether this will have a detrimental effect on the business's culture;  with a high proportion of staff working irregular hours it may become much more difficult to instil a culture and sense of identity with the organisation.

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3 Businesses That Have Thrived during the Economic Downturn

Monday, May 13, 2013

It is now six years since the global financial crisis triggered a prolonged downturn in economic activity. The UK economy, like other developed economies, has struggled to escape from a period of stagnant economic growth.

However, despite the weak economy, many UK firms have succeeded in significantly growing their revenues and profits.

Here are three examples of such businesses. Their strategies for success are different – but there are also some similarities.

Can you compare and contrast these three – and also identify some other businesses that have enjoyed similar success despite the tough economic environment?

You might also consider:

  • What factors have driven revenue growth at each of the three businesses?
  • Has their growth strategy been based on organic or external development?
  • To what extent has their growth been driven by international expansion?
  • Do you think their recent success can be sustained?
  • What factors might that continued success depend on?

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Shocker or Cracker? BYOD and find out

Monday, April 29, 2013

Seeking a way to make costs, revenue and profits interesting for my business students and get them digging deep into the reality of cost control, revenue generation I developed the "Shocker or Cracker?" activity.

This requires students to conduct independent research within the classroom using their own electronic devices (laptop, tablet or samrtphone) and helps to generate a healthy sense of competition.

There has been increasing debate about the merits of adopting a Bring Your Own Device (BYOD) policy within schools and colleges so I thought I'd give it a go...

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BUSS4 Revision: Economic Environment for UK Businesses

Saturday, April 27, 2013

Here is an updated revision presentation on aspects of the economic environment for UK businesses in the late spring of 2013.

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Return on Capital: a snapshot of British Business

Friday, April 26, 2013

Whenever you are investigating a firm’s accounts – perhaps using ratio analysis – you quickly realise that the answers you’re generating only really make sense when you compare them against something, like last year’s figures, or those of a rival.

My students are looking at a case study (OCR F297) in which a firm is making a return on capital of approximately 11%.  We were wondering if that was a ‘good’ return or not.  I’ve come across an article that directly answers that question, and raises some other points that offer a revealing insight into the health of Britain’s businesses.

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Is the return of Pot Noodle further evidence of the decline of outsourcing?!

Friday, March 22, 2013

Perhaps we’re all guilty of picking up on ideas or stories that support a particular view that you feel is right.  Ever since I began reading about doubts over the benefits of outsourcing and offshoring I’ve seen more stories on the same theme.  There was Bob, who had outsourced his own IT job to China.  Then came a special report in The Economist that asked some searching and detailed questions too (you can read more here).

And now the definitive proof - the "Nation's Noodle" is coming home. Golden Wonder's pot noodles are currently made in China and shipped 10,000 miles to the UK, but the 191-year-old British company that makes the product has cancelled its Chinese contracts in favour of making its own noodles in Leeds.

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The Pound ‘falls in value’ - what does this mean for firms?

Wednesday, February 27, 2013

The value of the pound - or the exchange rate - is back in the news.  It looks as though enough international investors have sold £££s that its value has fallen quite sharply.  Here are some reminders of what this means, and some helpful reading links.

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The T in SWOT is Becoming More Important to Global CEOs

Monday, February 11, 2013

Threats - the T in SWOT analysis - are increasingly important to the CEOs of leading companies around the world.

Today's CEOs are concerned about a wide range of potential and ongoing threats to their business growth prospects - from catastrophic events, to economic and policy threats, and commercial threats.

In this short video from PwC, CEOs from a range of companies around the world, talk about their key concerns and the potential impact of these disruptions.

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Amazon - Work hard and ... er, work hard.

The FT today publishes a great report on the culture at Amazon's Rugeley distribution centre. An interesting insight into the culture of a cost focussed and highly effiecient business that is described by founder Jeff Bezos as: "Our culture is friendly and intense but if push comes to shove, we'll settle for intense."

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Findus hurdles to uncertainty

Friday, February 08, 2013

If you had lasagne last night you might be wondering if it was the last remains of the non-running hurdler "100% Pure Beef". Findus have a major problem to resolve after tests showed that their lasagne had been made from horsemeat.


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Is outsourcing about to go into decline?

Monday, January 21, 2013

This is a big story, given its own special report by The Economist – and it's a highly recommended read for A2 Business Students.

The central thrust of their argument is that the advantages of offshoring work (outsourcing overseas) are falling, fast.  The logic of returning work to the developed economies looks fairly convincing.

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Now Blockbuster fails ... is the High Street dying?

Thursday, January 17, 2013

 

I adapted the title for this blog from an article and video clip I came across in the Telegraph, which contains the observation that "consumers forgot that Blockbusters still existed".  I don't really think its demise was very hard to predict, and I think most of you will have seen this coming for some time.

But with the decline of Blockbusters - and so much other bad news on the High Street - I've decided to bundle together a lot of ideas and links to encourage students to work independently on this topic, to see if they can understand some of the forces putting pressure on our High Streets at the moment.

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Jessops goes into Administration Is the Niche Market a Tomb?

Wednesday, January 09, 2013

This afternoon The High Court appointed PricewaterhouseCoopers as Administrators of Jessops the high street camera retailer. The company has debts of £80m.

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China No Longer an Emerging Market - Soon to be the Biggest Market

Saturday, November 10, 2012

This is a really important development for business students who need to appreciate the dynamics of the global economy to understand. The OECD has forecast that, within four years, China will overtake the USA to become the largest economy in the world. The value of China's GDP in 2013 alone is forecast by the OECD to be bigger than all the Eurozone economies put together. China has arrived - and it has hugely significant implications for business.

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Business Cycle Lesson Activity

Saturday, November 03, 2012

I'm going to be discussing economic growth and the business cycle in my first Business Studies lesson back after half term, and am hoping this activity will really help the students to think carefully about how the changing business cycle affects a business.

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Deal or No Deal

Monday, October 08, 2012

As the October 10th deadline approaches, the board of BAE face significant difficulties to complete the proposed merger with EADS. 

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Demand - For Business Students

Friday, October 05, 2012

Here is a useful article from the BBC  which discusses how the weather can influence how much we spend. A handy starter to show that demand isn't always solely influenced by price. You can use the additional Q&A section here as an extension for your brighter students.

BAE EADS - Will the merger stall or take off?

Tuesday, October 02, 2012

The BAE EADS merger proposal ought to help pupils attempt develop analytical skills using PESTLE, SWOT or stakeholder models. Can you use these management tools to develop your analysis and evaluation and go beyond application and understanding?

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Foolish business error number 9,763,252

Friday, September 28, 2012

Or should that be 520 million?  That’s the amount that one trader apparently spent, in dollars, in a drunken night betting his company’s money on oil price movements.  He initially lost almost $10m (hence the title of this blog).

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The Wonder of Wonga

Monday, September 17, 2012

If you want to show students an example of how even the worst of economic downturns can still present an opportunity for some businesses then you could do worse than show them this article from the BBC about the net profit figures from pay-day loan specialists Wonga.com.  The article reports that Wonga have seen a trebling of their profits during 2011 as customers feel the pinch of the recession and look for a quick way to raise cash.

The article strays a little into negative reporting but it reminded me of a lesson I observed last year where the interest rate charged by Wonga was used as an example for students who were calculating compound interest using spreadsheets (you're not a true teacher of business studies until you've attempted to deliver a lesson on compound interest!).  Given the APR levels set by the company, students were calculating that a £100 loan that was not paid back for 4 years would accrue a debt of £315 million!

Up Up and Away

Wednesday, September 12, 2012

British Aerospace (BAE Systems) and EADS announced that they are discussing a merger.

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USP humour

Tuesday, August 28, 2012

Building up market share in a competitive market with mature brands, similar products and large rivals can be difficult, but attracting the attention or interest of potential customers may require innovative approaches to marketing.

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The UK economics puzzle - rising employment but falling GDP

Thursday, August 16, 2012

Here’s a conundrum. Why is employment in the UK economy rising (and unemployment falling) at a time when the economy is still shrinking?

The number of people out of work fell by 46,000 to 2.56 million in the three months to June 2012, according to the Office for National Statistics (ONS). But in the same period the UK’s national output is supposed to have shrunk by 0.7% - so what is behind the puzzling statistics?

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Problems with over capacity in the car market

Monday, August 13, 2012

The car industry is such a good place to go for examples of Business Studies in action.  Here, the problem under discussion is capacity utilisation.  This concept is very closely linked to the idea of a breakeven point.

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Economic Influences in action - austerity hits IWB maufacturer Promethean

Friday, July 27, 2012

Business Studies students often find economic influences a difficult topic to get to grips with. Here is a current example of a firm that has been hit by tighter government budgets brought about by recession and the need to cut spending.

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Retrenchment in Greece - Carrefour sells out for one euro

Saturday, June 16, 2012

The Greek economy contracted 6.5% in the first quarter of 2012. Carrefour, the massive french supermarket which is the world’s second largest retailer, has been operating in Greece in a joint venture with local partner Marinopoulos since 1999 and had 41 hypermarkets, 287 supermarkets and 479 convenience stores in Greece and Cyprus. They made 2.2 billion euros of sales there last year, but are thought to have made a loss of 440 million euros on that revenue.

A fall in sales of a further 16% in the first quarter of this year has now convinced Georges Plassat (a new CEO who took up his post last month) that it is worth taking a loss of 220 million euros to get rid of the business by selling it to the Joint Venture partner for just one euro, and the stock market clearly agrees with him as shares in Carrefour rose by 2.8% in Paris. Here is an example of a new CEO quickly making a decision to mark a change in strategy. Reuters quotes an un-named analyst who implies that the company needs to focus on its core business: “Greece was a market which had been dragging on them. They have their hands full with other projects. It’s better for them to concentrate on saving their French operations.”

M&S took a similar decision last month when they took a 44.9 million pound write-off on their Greek business. French bank Credit Agricole is transferring assets to France from its Greek subsidiary Emporiki bank. Given the deep uncertainty about what will happen to the Greek economy, a business strategy of retrenchment is looking like one which may gain momentum amongst overseas investors.

AQA BUSS4 Revision Presentations

Thursday, June 14, 2012

Our BUSS4 blog has a series of streamed revision presentations which students may find helpful in supporting their studies ahead of the exam. They are listed below:

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Contingency planning and the break-up of the Euro

Wednesday, June 13, 2012

The textbooks often find it hard to come up with a topical example of contingency planning which has widespread application - but I suspect that the possible break-up of the Euro zone is a good one. In fact I think this has to be the best example of a possible future event which is of such significance that almost every sizeable business needs to consider contingency planning.

With that in mind, this pdf document from accountants Deloitte provides some useful evidence of how contingency planning works. Its a detailed document and certainly not worth printing or reading in full. I have jotted down some examples from the document further below to illustrate the role that contingency planning plays for this potentially significant risk.

The key for students is to use examples like this to help develop the depth of their analysis. By using the Euro crisis, they are also able to demonstrate the use of relevant, independent research in their answers.

Let’s take a look…

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BMW and a business location activity

I was reading today that BMW i8 engines are to be built in Birmingham.  Why would the German-based car maker want to produce engines in the UK?  What’s brought them here?

I often find this is a great induction session for students who are new to Business Studies, or those progressing from AS to A2 and are looking to apply their knowledge and understanding.

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Shareholder conflict: the story so far – and its relevance to evaluation

Thursday, May 10, 2012

Two themes wrapped up together here.
Firstly, you will be sure to have noticed references to a ‘Shareholder Spring’ in which normally quiet and docile shareholders have been increasingly resistant to executives’ claims for ever higher rewards.  There’s a link to a very handy summary below.
Secondly, this serves as a reminder of one of the several ways in which you can boost the evaluative component of your answers.

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Exchange rate: £1 above €1.20

Tuesday, May 08, 2012

The pound buys more euros now than since November 2008, according to a news clip on the BBC.  Any Business Studies question with an international dimension gives you scope to talk about exchange rates.  This might be a story for you to refresh in your revision, so that you can make a brief reference to it when you are looking to add application, analysis or evaluation to your marks.

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Marketing analysis: the UK supermarket battleground

Thursday, May 03, 2012

Once again the BBC have posted up a clip that clearly and concisely (in two and a half minutes) neatly sums up the marketing challenges faced by the main UK supermarket chains: store locations, types of store, products, promotions, target markets … and prices.

On that point, there’s also more detailed news published recently about Waitrose matching Tesco prices, getting marketing mileage out of the John Lewis ‘never knowingly undersold’ pledge.

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OCR F297 case study: impact of the economic environment on the housing market

Tuesday, May 01, 2012

In just the last few days we have learnt that the economy has entered a ‘double dip’ recession, with the economy essentially stagnant since the peak of the economic crisis passed in summer 2009.  What does all this mean for the UK housing market – the central focus of the OCR F297 A2 case study?

This blog contains extracts from the F297 case study toolkit, as well as some extra comments, links and analysis.

read more...»

Revision Presentation - Business & Interest Rates

Saturday, April 07, 2012

This revision presentation explains the role of interest rates and how they affect both the cost of business finance and the wider impact on business demand.

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