Business (1. Understanding Business Activity & 2. People in Business)

Define Needs and Wants.

Needs: Goods or services that are essential for survival. Wants: Goods or services customers desire but are not essential for survival.

What is the Economic Problem?

Unlimited wants but limited resources to satisfy the wants.

Define Scarcity and Opportunity Cost.

Scarcity: The lack of sufficient products to fulfil the total wants of the population. Opportunity Cost: The next best alternative given up by choosing another item.

List the four Factors of Production.

1. Land (natural resources)

2. Labour (mental/physical efforts of employees)

3. Capital (finance, machinery, equipment)

4. Enterprise (skill/risk-taking of the individual).

Define Specialisation and Division of Labour.

Specialisation: When people and businesses focus on what they are best at.

Division of Labour: When production is split into different tasks and each worker performs one task.

What are the Advantages and Disadvantages of Specialisation for the worker?

Advantages: Trained in one task (increases productivity), become more skilled.

Disadvantages: Boredom/burnout from repetitive tasks; production stops if one worker is absent.

What is the purpose of Business Activity?

To combine scarce factors of production to produce goods or services to satisfy people’s needs and wants.

Define Added Value and give the formula.

Added value is the difference between the cost of purchasing bought-in materials and the price of the finished goods.

Formula: Selling price – Total cost.

How can a business increase Added Value?

1. Increase selling price by increasing quality/service.

2. Reduce the cost of materials but keep the price the same.

Define the Primary, Secondary, and Tertiary sectors.

Primary: Extracts/uses natural resources.

Secondary: Manufactures goods using raw materials.

Tertiary: Provides services to consumers and other industries.

Define De-industrialisation.

When there is a decline in the importance of the secondary sector.

Define Mixed Economy and the two sectors within it.

An economy with both a private and public sector. Private Sector: Businesses NOT owned by the government.

Public Sector: Owned and controlled by the government.

Define Privatisation.

Selling a public sector business to the private sector.

Define an Entrepreneur.

A person who organises, operates, and takes risks to make the business better.

List the 10 Characteristics of Entrepreneurs.

Hard-working

Risk Takers

Creative

Effective Communicators

Optimistic

Self-confident

Innovative

Independent

Ambitious

Decision-makers

State 2 Advantages and 2 Disadvantages of being an Entrepreneur.

Advantages: Independent, put own ideas into practice. Disadvantages: Risk of losing own money, many businesses fail, opportunity cost of lost income.

Define a Business Plan.

A document containing business objectives and essential details about operations, finance, and owners of a new business.

What are the 6 contents of a Business Plan?

Description of product, products/services, the market, business location, organisation structure/management, financial information/strategy.

How do Business Plans assist entrepreneurs?

1. Helps gain finance (banks require it).

2. Forces careful planning, which reduces the risk of failure.

Why does the government support start-ups?

Reduce Unemployment

Increase Competition

Increase Output

Benefit Society

Further growth of the Economy

List the 4 measurements of business size and their limitations.

1. Number of employees (Limitation: Capital-intensive firms)

2. Value of output (Limitation: doesn't account for value sold)

3. Value of sales (Limitation: different products have different prices)

4. Capital employed (Limitation: labour-intensive firms).

Define Internal and External Growth.

Internal: Expanding existing operations.

External: Takeover or merger with another business.

Internal: Expanding existing operations. External: Takeover or merger with another business.

Horizontal: Same industry/stage.

Vertical: Same industry/different stage (Forward/Backward).

Conglomerate: Different industry (diversification).

List 3 Disadvantages caused by Business Growth.

1. Diseconomies of scale (harder to control)

2. Poor communication

3. Conflict/culture clashes between management.

Why do small businesses remain small?

Small market size

Limited access to capital

Owner's personal choice

Size/cost of technology.

Identify the 5 main reasons businesses fail.

1. Lack of management skills

2. Failure to plan for change

3. Over-expansion

4. Poor financial management (liquidity)

5. Competition.

Define Unlimited Liability vs. Limited Liability.

Unlimited: Owner is held responsible for all business debts.

Limited: Liability of shareholders is limited to the amount they invested.

State 2 Pros and 2 Cons of a Sole Trader.

Pros: Complete control, keep all profits.

Cons: Unlimited liability, no one to share workload, difficult to raise finance.

State 2 Pros and 2 Cons of a Partnership.

Pros: Shared decision-making, more capital.

Cons: Unlimited liability, shared profit, potential for conflict.

What is a Private Limited Company (LTD)?

Business owned by shareholders but cannot sell shares to the public (only to family/friends).

What is a Public Limited Company (PLC)?

Business owned by shareholders; shares are tradable on the stock exchange and sold to the public.

Define Franchise, Franchisor, and Franchisee.

Franchise: Business based on an existing brand.

Franchisor: The original company.

Franchisee: The company that buys the right to use the brand.

Define a Joint Venture.

When two or more businesses work together on a project, sharing costs, risks, and profits.

List 4 Private Sector Business Objectives.

1. Survival

2. Generating profit

3. Returns to shareholders

4. Growth/Market Share.

Define a Social Enterprise and its 3 objectives.

A business with social objectives that reinvests profit.

Objectives: 1. Social

2. Environmental

3. Financial.

Define Stakeholder.

Any person or group with a direct interest in the performance and activities of a business.

Give 2 Internal and 2 External Stakeholder examples.

Internal: Owners, Managers, Workers.

External: Customers, Government, Banks, Community.

Explain why stakeholder objectives might conflict.

Different groups want different things (e.g., Customers want low prices, but Workers want high wages). Managers must compromise.

Define Motivation and list 4 influencing factors.

Factors that influence worker behavior.

Factors: Money, Job Security, Promotion, Status, Responsibility.

List Maslow’s Hierarchy of Needs (Bottom to Top).

1. Physical

2. Safety

3. Social

4. Esteem

5. Self-actualization.

Explain F.W. Taylor’s Theory.

Scientific Management: Workers are only motivated by money.

Explain Herzberg’s Two-Factor Theory.

1. Hygiene factors (conditions/pay) prevent dissatisfaction but don't motivate.

2. Motivators (achievement/recognition) drive performance.

Define Organisational Structure and Organisational Charts.

Structure: Levels of management and division of responsibilities within a company.

Charts: Diagrams that outline the internal management structure.

Define Chain of Command and Span of Control.

Chain of Command: The structure in an organisation which allows instructions to be passed down from senior management to subordinates.

Span of Control: The number of subordinates working directly under a manager.

Compare Tall vs. Flat Organisational Structures.

Tall: Long chain of command, "narrower" span of control.

Flat: Short chain of command, "wider" span of control.

List 2 Advantages for both Short and Long Chains of Command.

Short: Communication/decision-making is quicker; top management is more "in touch" with the business.

Long: Decisions are checked by more people (reducing errors); lesser subordinates means managers can focus more on their specific workers.

Define Delayering.

Reducing the size of the hierarchy by removing one or more levels, often the middle management.

Define Delegation and list 2 Advantages/Disadvantages.

Giving a subordinate the authority to perform particular tasks.

Pros: Job enrichment/satisfaction for subordinate; trains junior managers.

Cons: Some managers are reluctant to delegate; managers lose some control.

Compare Centralised vs. Decentralised Organisation.

Centralised: Important decision-making power is held at the head office/centre.

Decentralized: Decisions are made based on local needs.

List the 5 Functions of Managers.

1. Planning (setting objectives)

2. Organizing (resources)

3. Commanding (motivating workers)

4. Coordinating (bringing departments together)

5. Controlling (checking if plans work).

Define and give a characteristic of Autocratic Leadership.

Manager expects to be in charge and have orders followed.

Characteristic: Leader does all decision-making without input from others.

Define and give a characteristic of Democratic Leadership.

Gets other employees involved in decision-making.

Characteristic: Better decisions result from consulting employees with ideas/experience.

Define and give a characteristic of Laissez-Faire Leadership.

Makes broad objectives known but leaves workers to make decisions and organise work.

Characteristic: Leader only gives guidance/takes charge when necessary.

Define Trade Unions and their role.

A group of employees who have joined together to protect their interests (e.g., negotiating pay, legal support, resolving conflict).

Define Job Analysis, Job Description, and Job Specification.

Analysis: Identifies/records responsibilities of a job.

Description: Outlines tasks and responsibilities.

Specification: Outlines the required skills, qualifications, and personal qualities.

Compare Internal vs. External Recruitment.

Internal: Vacancy filled by an existing employee (Pros: cheaper, person is known).

External: Suitable applicant from outside the business (Pros: new ideas, more comprehensive selection).

List the 8 stages of the Full Recruitment Process.

1. Job analysis

2. Job description

3. Job specification

4. Advertise vacancy

5. Send/read application forms

6. Shortlist

7. Interviews/tasks

8. Selection/offer.

Compare Part-time vs. Full-time Employees.

Part-time: Works less than 35 hours (Flexible, reduces costs).

Full-time: Works more than 35 hours (Consistent, more loyal/committed).

List the 3 types of Training.

1. Induction: Introduction given to a new employee.

2. On-the-job: Watching an experienced worker at the workplace.

3. Off-the-job: Being trained away from the workplace by specialists.

Define Workforce Planning.

Establishing the workforce needs for the foreseeable future regarding number and skills required.

Define Dismissal vs. Redundancy.

Dismissal: Employment ends because of the employee's bad behavior/unsatisfactory work.

Redundancy: When an employee is no longer needed (not due to their fault, e.g., shop closure).

Define Internal vs. External Communication.

Internal: Between employees of the same business.

External: Between the business and outside individuals/organisations.

List the 4 stages of Effective Communication.

1. Transmitter (sends message)

2. Medium (method)

3. Receiver (receives message)

4. Feedback (receiver confirms receipt).

List 3 Methods of Communication and one Pro/Con for each.

1. Verbal: Quick feedback / No permanent record.

2. Written: Permanent record / "Hard evidence" / May lead to information overload.

3. Visual: More appealing / No feedback possible.

List the 4 types of Communication Barriers.

1. Problems with the Sender (unclear message)

2. Problems with the Medium (message lost)

3. Problems with the Receiver (poor attitude/listening)

4. Problems with Feedback (not sent or unclear).

What are the specific Advantages of Delegation for the Manager and the Subordinate?

Manager: Can focus on more important tasks; easier to measure staff performance.

Subordinate: Work becomes more interesting (job enrichment); trains them for more important roles.

What are the Disadvantages of Autocratic Leadership?

No opportunity for employee input; can be demotivating for workers as they feel their ideas aren't valued.

What are the Advantages of Democratic Leadership?

Better decisions often result from consulting employees with more "hands-on" experience; increases worker motivation.

What are the Disadvantages of Laissez-Faire Leadership?

Lack of direction for the group; can be ineffective if workers lack the skill or motivation to manage themselves.

List 3 Advantages of Internal Recruitment.

1. Vacancy filled quickly/cheaper.

2. Candidate's reliability and skills are already known.

3. Motivating for other employees to see promotion opportunities.

List 2 Disadvantages of Internal Recruitment.

No "new blood" or fresh ideas brought into the business. 2. May cause jealousy among colleagues who weren't promoted.

List 2 Advantages of External Recruitment.

1. New ideas and skills brought into the business.

2. Wider range of experience to choose from.

What are the Pros and Cons of On-the-Job Training?

Pros: Cheaper (no travel/fees); trainee still produces output while learning.

Cons: Trainer may pass on bad habits; trainer is less productive while teaching.

What are the Pros and Cons of Off-the-Job Training?

Pros: Specialists teach high-quality skills; no distractions from the workplace.

Cons: Expensive (fees/travel); employee produces nothing while away.

What are the Advantages of hiring Part-time workers?

Flexible hours; easier to ask them to work at busy times; cheaper than hiring full-time staff for the same role.

What are the Disadvantages of hiring Part-time workers?

May be less committed/loyal to the business; more difficult to communicate with if they aren't there when needed.

Why do businesses need Workforce Planning?

To identify if they have enough workers, if those workers have the right skills, and to plan for future recruitment or redundancies.

What are the legal reasons for Dismissal?

Breaking the contract (e.g., stealing, constant lateness) or being unable to do the job even after training.

What are the reasons for Redundancy?

The job no longer exists (e.g., business closure, merger making roles overlap, or new technology replacing workers).

List 2 Sender-related communication barriers.

1. Using language that is too difficult/technical (jargon).

2. Speaking too quickly or unclearly.

List 2 Receiver-related communication barriers.

1. Not paying attention or listening properly.

2. Poor attitude/prejudice towards the sender.

What is the risk of using Written Communication for a long message?

It can lead to Information Overload, where the receiver ignores parts of the message or fails to find the most important points.

List the 5 items typically found in a Job Advertisement.

1. Job title

2. Requirements (qualifications/skills)

3. Location

4. Working hours

5. Pay/Benefits.

What is the purpose of a Letter of Application and a CV?

CV: Summary of personal details, qualifications, and experience.

Letter of Application: Explains why the candidate wants the job and why they are suitable (summarising the CV).

What is the difference between an Application Form and a CV?

An Application Form is designed by the business to ask specific questions they want answers to, whereas a CV is designed by the applicant.

List the 3 common methods of selecting a candidate after shortlisting.

1. Interviews

2. Aptitude/Skills tests

3. Personality tests.

Define "Legal Controls" over employment (Contract of Employment).

A legal agreement between employer and employee listing rights and responsibilities (e.g., hours of work, rate of pay, notice period).

Identify 2 more visual communication methods from your notes.

1. Photographs/Posters

2. Diagrams/Charts.

Why is Feedback so important for "Effective Communication"?

Without feedback, the sender does not know if the message has been received, understood, and acted upon.

What is "Information Overload" and which communication medium causes it most?

When too much information is sent at once, causing the receiver to ignore parts of it. Most commonly caused by Written communication (emails/reports).