Unit 1 (copy)

IGCSE EDEXCEL CHAPTER 1-15

business

organisation that provide goods and services

goods

physical products such as mobile phones, a bag of chips, or a magazine

services

non-physical products, such as banking, healthcare, and education

consumer goods

goods and services sold to customers or consumers

producer goods

goods and services produced by one business for another

Name 3 consumer goods

Books, Newspaper, Taxi etc

Name 3 producer goods

Insurance, Materials, Vehicles etc

human resources

the department of a business that deals with employing, training, and helping people

output

the amount of goods produced by a person

need

a basic requirement for survival and includes food, clothing, and shelter

want

an item that we desire but that is not essential to survival

scarce

in short supply; limited

private sector

business organisations owned by individuals or groups of individuals

public sector

business organisations owned by central or local government

stakeholder

a group or individual with an interest of the operation of a business

Euntrepreneur

a person who organizes and operates a business and takes the risks

objectives

The goals or targets set by a business to help achieve its long-term purpose

executives

managers in businesses that help make important decisions

diversify

when a business increases the variety of goods and services it provides

objective

should be specific and short term and have more measurable outcomes

Why is it important for a business to have clear objectives?

* So employees have something to work towards → motivation
* Owners can lose motivation without them → business failure
* Easier to assess the performance of a business

State some financial objectives.

* Survival
* Profit
* Increase market share
* Financial Security

State some Non-Financial objectives

* Social objectives
* Personal Satisfaction
* Independance / Control

aims

statements of intent and set out what you want to achieve

Why might objectives change as businesses evolve?

* Market conditions → trends
* Technology
* Performance
* Legislation
* Internal reasons

profit maximisation

making as much profit as possible in a given time period

shareholders

owners of limited company

dividend

share of profit paid to shareholders

profit satisficing

making enough profit to satisfy the needs of the business owner(s)

Automation

Use of computers and machines instead of people to do a job

Economies of scale

Financial advantages (falling average costs) of producing something in very large quantities

large business

a business that employs more than 250 people

small business

A business that employs less than 50 people

Legislation

A set of laws

revenue

money from the sales of goods and services

innovator

someone who introduces changes and new ideas

labour

people employed in a business/used in production

sole trader

business owned and operated by one person

unlimited liability

The owner is personally and fully responsible for all losses and debts of the business

What are advantages of a sole trader?

* The owner keeps all the profit
* They are independant → In control
* Flexibility (e.g can adapt to change quickly)

What are disadvantages of a sole trader?

* Unlimited Liability
* Long hours + more workload
* May struggle to raise finance- considered too risky by those who lend money to it

partnership

a business owned by two or more people

Limited partnership

Partnership where some partners contribute capital and enjoy a share of the profit but do not take part in the running of the business

What are the advantages of a partnership?

* workload is shared
* financial info isn’t published
* More capital can be raised because more owners

What are the disadvantages of a partnership?

* Partners have unlimited liability
* profit has to be shared
* any partner’s decision is legally binding on all partners

Audits

Official examination of a company's financial records in order to check that they are correct.

Deed of partnership

binding legal document which states the formal rights of partners

franchise

structure in which a business (the franchisor) allows a franchisee to trade under their name

What are advantages to the franchisee?

* Less risk
* Set-up costs are predictable
* Back-up support is given

What are disadvantages to the franchisee?

* profit is shared with the franchisor
* strict contracts have to be signed
* lack of independence

What are advantages to franchisor?

* fast method of growth
* franchisees take some risk
* fast method of growth

What are disadvantages to the franchisor?

* potential proprofitft shared with the franchisee
* poor franchisees can damage the brand’s reputation
* cost of support for franchisees can be too high

merchendise

goods that are being sold

social enterprise

business that aims to improve human or environmental well-being ex: charities

cooperative

an organisation in which all of the people working there own an equal share of it ( this is a form of social enterprise)

consumer cooperative

owned by customers

Retail cooper

Cooperative of retail members who often work together to assert their purchasing power

worker cooperative

owned by its employees

limited companies

businesses that have seperate legal identity from its owners

limited liability

shareholders are legally responsible for the debts of a company according to how many shares they own

venture capitalists

Specialist who provide money for business purposes often to new businesses

chairperson

someone who is in charge of a meeting or directs the work of a comittee or organisation

certificate of incorporation

document needed before a new company can start doing business

Private Limited Company (Ltd)

company limited by its shares whoih means the the liability of shareholders to the creditors of the company is limited to the capital originally invested

What are the features of private limited companies?

* their business name ends in limited or Ltd.
* shares can only be transferred privately and cannot be sold on the stock market.
* the directors of these firms tend to be shareholders and are involved in the running of the business

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What are some advantages of private limited companies?

* shareholders have limited liability
* control cannot be lost to outsiders
* business continues if a shareholder dies

What are some disadvantages of private limited companies?

* financial info has to be made public
* costs money and takes time to set up
* profits are shared between more members

stock market

A system for buying and selling shares of companies

public limited company (plc)

a limited company whose shares can be freely bought and sold by members of the public

What is a Memorandum of Association?

document limited company needs to be formed.

It gives details about the company such as its name and address, objectives, amount of capital to be raised and the number of shares to be issued.

What is an Article of Association?

document limited company needs to be formed.

It deals with the internal runnings of the company. It includes details such as the rights of shareholders, procedures for appointing directors, and timing and frequency of company meetings.

Why is a company going public expensive?

* the company needs to ensure the prospectus is legally correct
* there are advertising and administrative expenses
* the PLC must have a minimum of 50000 GBP share capital

What are the advantages of public limited companies?

* shareholders have limited liability
* a large amount of capital can be raised
* shares can be bought and sold very easily

What are the disadvantages of public limited companies?

* outsiders can take control by buying shares
* more financial info has to be made public
* managers may take control rather than owners

prospectus

document produced by company that wants the public to buy its shares

regulatory control

official power to control an activity and make sure it is done in a satisfactory way

flotaiton

process of company going public

multinational company

large company with operations in atleast two different countries

What are features of a multinational company?

* huge assets and turnover
* highly qualified and experienced managers
* powerful advertising and marketing capability
* advanced and up-to-date technology
* highly influential economically and politically

issue (shares)

sale of new shares

productivity

rate at which goods are produced

public corporations

business controlled and owned by government

What are features of public corporations.

* owned by the government
* incorporates
* state-funded
* provide public services

portfolio

collection of business interests of products

infratstructure

basic systems and structures that a country or organization needs in order to work properly

natural monopoly

market where it is more efficient to have one organisation meeting total market demand

Reasons for public ownership of businesses.

* avoid wasteful duplication
* save jobs
* fill gaps left by the private sector

Reasons against public ownership of businesses.

* difficult to control ( cause of size )
* political interference ( government )
* inefficiency

subsidise

paying part of costs

privatization of public property

transfer of public sector resources to the private sector

What are ways privatisation can take place?

* sale of public corporations
* deregulation
* contracting out

Why does privatisation take place?

* to generate income
* to reduce inefficiency in the public sector
* to reduce political interference

What are the factors affecting the appropriateness of different forms of ownership?

* growth
* size
* the need for finance
* control
* limited liability

What are reasons for privitisation?

* improves efficiency
* fills market gaps left by public sector

What are the reasons against privatisation?

* It’s difficult to control.
* Private businesses are likely to increase prices.

primary sector

production involving extraction of raw materials from earth

secondary sector

conversion or raw materials into finished goods

tertiary sector

selling finished product to costumer

interdependence

each sector will rely on the other

De-industrialisation

shift in focus from secondary sector