COMPLETE IGCSE BUSINESS

benefits of specialisation

increases efficiency and output

less time wasted moving workbenches

quicker and cheaper to train workers

limitations of specialisation

workers become bored -> lose motivation -> decrease efficiency

if one worker is absent -> production stopped

purpose of business activity

combines scarce FOP

produce goods and services

employs people

importance of added value

can pay other costs

make a profit

how added value can be increased

increase selling price while keeping cost same

reduce costs of materials while keeping selling price same

reasons for the changing importance of business classification

sources of primary products become depleted

developed economies losing competitiveness in manufacturing

increase wealth and living standards -> consumers spend more on goods and services

characteristics of successful entrepreneurs

hardworking -> long hours

risk taker -> making decisions

creative -> new ideas to attract customers

optimistic -> look forward

self confident -> convince people of skills

innovative -> new ideas

independent -> work alone

effective communicator -> talk clearly to shareholders

contents of a business plan

description of business

products and services

market

business location

organisation structure and management

financial information

business strategy

how governments support business start-ups

business ideas

premises

finance

labour

research

methods of measuring business size

number of employees

value of output

value of sales

value of capital employed

limitations of methods of measuring business size

labour vs capital intensive

type of goods (expensive tvs vs pencils)

why some businesses want to grow

higher profits

more status/reputation

lower average costs

larger market share

why some businesses remain small

maintain close customer relationships

personal service

small market size

specialised goods

owners' objectives

benefits of integration

reduce number of competitors

economies of scale

bigger profit margin

diversity

causes of business failure

lack of management skills

changes in business environment

liquidity problems/poor financial management

why new businesses are at a greater risk of failing

lack of finance

poor planning

inadequate research

benefits of sole trader

few legal regulations

complete control

freedom for holidays

keep all profits

limitations of sole trader

unlimited liability

unincorporated business

no discussions

remain small

benefits of partnership

more capital invested

shared responsibility

limitations of partnership

unlimited liability

unincorporated business

disagreements

limit number of partners

benefits of private limited company

limited liability

incorporated business

maintain control

limitations of private limited company

legal matters

shares cannot be sold to public

account must be public for competitors

benefits of public limited company

limited liability

incorporated business

can sell shares to public

limitations of public limited company

legal matters

account must be public for competitors

benefits to franchisor

franchisee buys licence

fast expansion

not responsible for management

limitations to franchisor

poor management -> bad reputation

franchisee keeps profits from outlet

benefits to franchisee

reduce chance of business failure

franchisor pays for advertising

fewer decisions to make

limitations to franchisee

less independence

licence fee

benefits of joint venture

sharing costs

increase knowledge

sharing risks

limitations of joint venture

profits shared

disagreements

different cultures

benefits of public corporations

government can nationalise

secure jobs

public services

limitations of public corporations

lack motivation -> no demands of profits

government subsidies -> inefficiencies

no competition

importance of business objectives

increase motivation

making decisions

unit business

measure successfulness

different business objectives

business survival

profit

returns to shareholder

growth of business market share

service to the community

objectives of social enterprises

provide jobs and support

protect environment

expand in social work

objectives of different stakeholder groups

owners: profits and growth

workers: payment, security and satisfaction

managers: high salaries, security and control

customers: safe, reliable products, good quality, reliability

government: success of business, legal

community: jobs, no environment damages

banks: pay debt with interest

People in Business

why people work

to earn income for living expenses

to gain job satisfaction and a sense of achievement

to achieve status, power, or recognition

to feel secure and have regular employment

to use and develop skills

benefits of a well motivated workforce

higher productivity

better quality of work

lower labour turnover

fewer absences

greater commitment to the business

better customer service

non financial methods

job enrichment: gives workers more interesting and challenging tasks

job rotation: workers move between different jobs to reduce boredom

teamworking: encourages cooperation and shared responsibility

training: improves skills and confidence

opportunities for promotion: gives workers something to work towards

the role of management

planning: deciding what the business will do and how it will do it

organising: arranging resources, people, and tasks

coordinating: making sure different parts of the business work together

commanding: giving instructions and directing staff

controlling: checking performance against plans and correcting problems

features of the main leadership styles, e.g. autocratic, democratic and laissez faire

autocratic: manager makes decisions alone

fast but less worker involvement

democratic: workers are involved in decisions

can improve motivation but may take longer

laissez faire: workers are given a lot of freedom

suitable for skilled staff but can reduce control

effects of employees being union members

better bargaining power for wages and conditions

greater job protection

possible strikes or industrial action if disputes are not resolved

can improve communication between workers and management

may increase labour costs for the business

internal recruitment

quicker

cheaper

external recruitment

gives access to a wider range of applicants

new ideas

main stages in recruitment and selection of employees

identify the vacancy

prepare a job description

prepare a person specification

advertise the job

receive applications

shortlist candidates

interview or test candidates

select the best applicant

offer the job and issue a contract

benefits of part time employees

flexible

cheaper

limitations of part time employees

less committed

need more scheduling

benefits of full time employees

more available

more committed

limitations of full time employees

cost more in wages and benefits

the importance of training

improves worker skills

increase productivity

reduces mistakes

improves motivation and confidence

helps workers adapt to new technology

improve quality and customer service

methods of training

induction training: company overview, job intro

on the job training: performing in workplace with guidance

off the job training: focus on learning in detail

importance of training to a business

higher productivity

better quality

fewer errors

improved flexibility

importance of training to employees

better skills

more confidence

greater job satisfaction

benefits of induction training

helps new employees settle into the business

shows them the rules, layout, and safety procedures

reduces mistakes in the early days

saves time and improves confidence

limitations of induction training

limited because it does not usually teach full job skills

benefits of on the job training

workers learn while doing the actual job

usually cheaper than off the job training

easy to apply directly to the business

limitations of on the job training

can be disrupted by mistakes during learning

training quality depends on the person doing the training

benefits of off the job training

can teach broader and more advanced skills

often more expensive

less disruption to daily work

limitations of off the job training

may be less directly linked to the actual job

legal controls

employment contracts: set out the rights and duties of employer and employee

unfair dismissal: workers cannot be dismissed without a fair reason and proper procedure

discrimination: employers must not treat workers unfairly

health and safety: employers must provide a safe working environment

legal minimum wage: employers must pay at least the minimum legal pay rate

why effective communication is important

helps workers understand what they must do

reduces mistakes and confusion

improves coordination between departments

helps managers motivate workers

supports quicker decision making

types of communication

verbal communication: fast and personal, but no permanent record

written communication: clear record, but slower and may lack immediate feedback

visual communication: quick to understand, but may not give enough detail

electronic communication: fast and wide reaching, but can be ignored or misunderstood

how communication barriers arise

poor wording or unclear messages

language differences

noise or distractions

too many layers in the chain of command

bad timing or the wrong communication method

lack of feedback

problems of ineffective communication

mistakes in work

delays

conflict between workers and managers

poor customer service

reduced efficiency

how communication barriers can be reduced

use simple and clear language

choose the right method for the message

encourage feedback

reduce unnecessary layers in communication

train staff in communication skills

make sure messages reach the right people quickly

Marketing

identifying customer needs

product or service

price

where and how they want to buy it

satisfying customer needs

right product, place and time

matches consumer expectations

adapting products if customer tastes change

maintaining customer loyalty

loyalty cards

good service

cheaper

building customer relationships

communicating with customers

collecting information about changing needs

customer feedback to improve products and service

helping the business understand why customers buy and how they use products

why customer spending patterns may change

tastes and fashions change over time

new technology can replace older products

changes in income

ageing populations create demand for different products

the importance of changing customer needs

businesses that fail to respond may lose sales

customer needs change quickly in some markets

successful businesses research and react to these changes

keeping up with needs helps survival and growth

why some markets have become more competitive

globalisation -> increased worldwide competition

better transport -> goods easier and cheaper to move

e-commerce -> buy from overseas suppliers

consumers can compare products and prices more easily

how businesses can respond to changing spending patterns and increased competition

maintain good customer relationships

keep improving existing products

bring out new products

keep costs low to keep prices competitive

benefits of product orientated marketing

focuses on the product first

then tries to find a market

limitations of product orientated marketing

risky if customers do not want it

benefits of market orientated marketing

carries out research first

then develops the product

more adaptable

more likely to survive

limitations of market orientated marketing

time

marketing budget

benefits of market segmentation

helps businesses target different types of consumers more effectively

more cost effective

reveal gaps in the market

how markets can be segmented

age

socio economic group or income

location or region

gender

use of the product

lifestyle

benefits of segmentation to business

higher sales and profits from more focused marketing

better match between product and customer needs

more effective advertising and packaging

may reveal an unmet segment or gap in the market

benefits of primary research

up to date

relevant

first hand

useful for specific problems

limitations of primary research

expensive

time consuming

not immediately available

benefits of secondary research

cheaper

quicker

easier to obtain

limitations of secondary research

outdated

may not be exact for the business's needs (not specific)

methods of primary research

questionnaires

surveys

interviews

focus groups

the need for sampling

too expensive and time consuming to ask everyone

a sample gives a practical group to study

random samples give everyone an equal chance

quota samples can target age, gender, or income groups

methods of secondary research

online sources

government sources

commercial market research reports

trade journals and newspapers

internal business records

factors influencing the accuracy of market research data

size of the sample

how representative the sample is

wording of the questions

random or quota based

clear and unbiased

use of market research

businesses use the findings to make marketing decisions

good research helps decide product features, pricing, promotion, and distribution

conclusions should be drawn from the data before action is taken

benefits of developing new products

attract new customers

increase sales

stay competitive

meet changing needs

limitations of developing new products

high development costs

risk of failure

take time to become profitable

the role of packaging

protects the product

makes the product easier to store and transport

attracts customers and helps brand image

can provide useful information such as instructions or ingredients

the product life cycle

introduction: sales are low and promotion is informative

growth: sales rise quickly and profits improve

maturity: sales peak and competition increases

decline: sales fall and profits decrease

extension strategies: new packaging, changes in price, new promotion, or product improvements

pricing methods

cost plus: adds a profit margin to cost

competitive pricing: based on rivals' prices

penetration pricing: low price to gain market share quickly

skimming pricing: high initial price for a new product

promotional pricing: temporary price reductions to increase sales

benefits and limitations of different channels

wholesalers: wider distribution but lower profit margin for the producer

retailers: convenient for customers but adds cost

direct to consumers: more control and higher margins but needs more business effort

the aims of promotion

inform customers about a product

persuade customers to buy

remind customers about the product

increase brand awareness and sales

different forms of promotion and how they influence sales

advertising: reaches many people and builds awareness

sales promotion: short term incentives like discounts or free samples can boost sales

personal selling: sales staff explain the product and persuade customers

public relations: improves the image of the business and its products

sponsorship: links the business with events or teams and improves brand recognition