Understanding Business Performance (Edexcel GCSE Business)

• Quantitative data is statistical numeric data that can be used to support decision making
  • Quantitative data needs to be accurate and interpreted correctly if it is to be useful
     
• Quantitative data may be collected from primary or secondary sources
  • Primary data is collected first hand for a specific purpose
  • Secondary data has been collected by someone else
    
    
• Sources of quantitative data include
  • graphs and charts
  • financial data
  • marketing data
  • tables or infographics

  

1. Information from Graphs & Charts

• Information presented in graphs and charts is often easy to understand because it is presented visually

   

Types of Graphs & Charts

Name	Explanation	Example
Bar Chart	This bar graph provides a clear picture of umbrella sales between January and April and allows a manager to compare sales between each month
Pie Chart	This pie chart breaks down all umbrella sales into those achieved by different models It shows clearly that more than half of sales were 'Ultra' umbrellas
Scatter Graph	Scatter graphs allow relationships between two variables to be identified The scatter graph on the right shows that there is a clear relationship (a positive correlation) between the temperature and sales of barbecues As the temperature increases sales of barbecues increase   A positive correlation exists when an increase in one variable leads to an increase in another On a scatter graph an upwards trend on the plots can be identified A negative correlation exists when an increase in one variable leads to a decrease in another On a scatter graph a downwards trend on the plots can be identified   Correlations may be strong or weak A strong correlation allows a line of best fit to be applied with ease Where a weak correlation exists it is difficult to identify a line of best fit

  

2. Financial Data

• Businesses can use a selection of internal and external financial data to support decision making including
  • Sales revenue
  • Profit
  • Costs 
  • Tax
  • Interest and exchange rates
  • Valuations of assets
  • Bank balances
     
• Companies need to send key financial data to Companies House each year whereas sole traders and partnerships may keep this information private
   

Marketing Data

• Marketing data is collected through primary and secondary market research such as
  • Surveys
  • Focus groups
  • Observation
  • Customer feedback
  • Retail or online footfall
  • Government or trade publications
  • The media
     
• Marketing data can help business managers forecast sales and to make decisions about product development and promotional plans
   

Market Data

• Market data refers to the characteristics and performance of the market in which a business operates such as
  • Demographic data relates to the market's population structure such as age, gender and income statistics
  • Market dimensions includes factors such as the size of the market, the market shares of key competitors, the rate of market growth and average prices across the market
  • Investment data relates to the prices of commodities (e.g. oil) as well as exchange rate data and stock market performance
     
• Market data can help a business identify and plan for new opportunities and spot external threats such as the increased power of a competitor

• It can also be used alongside other types of quantitative data to make investment decisions 

• Businesses can use financial data in several ways

• • To identify trends and make calculations for comparison over time and with other businesses
  • To support an application for external finance such as a loan
  • To attract potential investors
  • To support spending decisions

• There is a range of limitations to the use of financial data in decision making

Limitations to the use of Financial Data in Decision Making

Limitation	Explanation
Different interpretations of data	Statistical information can be interpreted in different ways E.g. raw data may show a sharp increase in sales but when compared to competitors this increase may be less impressive Financial data can be window dressed to present a positive impression of performance E.g.  a business may announce that 80% of customers would recommend a product to a friend without acknowledging that one in five customers would not
Data becomes out of date quickly	By its very nature financial data relating to sales, costs and profit is out of date as soon as it is generated   Using financial data to make decisions relies on future performance to be at least broadly similar to past performance
Qualitative factors are ignored	Businesses measure their performance against a range of financial and non-financial criteria E.g. businesses that aim to be socially responsible or behave ethically may find it difficult to measure their successes in these areas in statistical terms