Business Studies IGCSE

Need

A good or service essential for living.

Want

A good or service which people would like to have but which is not essential for living. People’s wants are unlimited.

Economic problem

There exist unlimited wants, but limited resources to produce the goods and services to satisfy those wants. This creates scarcity.

Factors of production

Resources needed to produce goods or services. There are four factors for production, and they are in limited supply.

Scarcity

The lack of sufficient products to fulfill the total wants of the population.

Opportunity cost

The next best alternative given up by choosing another item.

Specialisation

Occurs when people and businesses concentrate on what they are best at.

Division of labour

When the production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialisation.

Businesses

They combine factors of production to make products (goods and services) which satisfy people’s wants.

Added value

The difference between the selling price of a product and the cost of bought-in materials and components.

Primary sector (of industry)

It extracts and uses the natural resources of Earth to produce raw materials used by other businesses.

Secondary sector (of industry)

It manufactures goods using the raw materials provided by the primary sector.

Tertiary sector (of industry)

It provides services to consumers and the other sectors of industry.

De-industrialisation

When there is a decline in the importance of the secondary, manufacturing sector of industry in a country.

Mixed economy

It has both a private sector and a public (state) sector.

Private sector

Businesses not owned by the government.

Public (state) sector

Government (or state) owned and controlled businesses and organisations.

Privatisation

When the government changes the balance between private and public sectors by selling some public sectors to private sectors.

Capital

The money invested into a business by the owners.

Entrepreneur

A person who organizes, operates, and takes the risk for a new business venture.

Business plan

A document containing the business objectives and important details about the operations, finance, and owners of the new business.

Capital employed

The total value of capital used in the business.

Internal growth

Occurs when a business expands its existing operations.

External growth/integration

Occurs when a business takes over or merges with another business.

Takeover/acquisition

When one business buys out the owners of another business, which then becomes part of the ‘predator’ business.

Merger

When the owners of two businesses agree to join their businesses together to make one business.

Horizontal integration

When one business merges with or takes over another one in the same industry at the same stage of production.

Vertical integration

When one business merges with or takes over another one in the same industry but at a different stage of production. It can be forward or backward.

Conglomerate integration/diversification

When one business merges with or takes over a business in a completely different industry.

Sole trader

A business owned by one person.

Limited liability

The liability of shareholders in a company is limited to only the amount they invested.

Unlimited liability

The owners of a business can be held responsible for the debts of the business they own. Their liability is not limited to their investment.

Partnership

A form of business in which two or more people agree to jointly own a business.

Partnership agreement

The written and legal agreement between business partners. Recommended but not essential.

Unincorporated business

Does not have a separate legal identity (e.g., sole traders and partnerships).

Incorporated business

Has a separate legal status from its owners.

Shareholders

Owners of a limited company. They buy shares which represent part-ownership of the company.

Private limited companies

Businesses owned by shareholders but they cannot sell shares to the public.

Public limited companies

Businesses owned by shareholders that can sell shares to the public. Shares are tradeable on the Stock Exchange.

Annual General Meeting (AGM)

A legal requirement for all companies where shareholders vote on the Board of Directors.

Dividends

Payments made to shareholders from the profits (after tax) of a company as a return for investing.

Franchise

A business based upon the use of brand names, promotional logos, and trading methods of an existing successful business.

Joint venture

Two or more businesses start a new project together, sharing capital, risks, and profits.

Public corporation

A business in the public sector that is owned and controlled by the state (government).

Business objectives

The aims or targets that a business works towards.

Profit

Total income of a business (revenue) less total costs.

Market share

The percentage of total market sales held by one brand or business.

Social enterprise

A business that has social objectives as well as an aim to make a profit to reinvest back into the business.

Stakeholder

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

Motivation

Reasons why employees want to work hard and effectively for the business.

Wage

Payment for work, usually paid weekly.

Time rate

The amount paid to an employee for one hour of work.

Piece rate

The amount paid for each unit of output.

Salary

Payment for work, usually paid monthly.

Bonus

An additional amount of payment above basic pay as a reward for good work.

Commission

Payment relating to the number of sales made.

Profit sharing

A system whereby a proportion of the company’s profits is paid out to employees.

Job satisfaction

Enjoyment derived from feeling that you have done a good job.

Job rotation

Involves workers swapping around and doing each specific task for only a limited time before changing again.

Job enrichment

Involves looking at jobs and adding tasks that require more skill and/or responsibility.

Teamworking

Involves using groups of workers and allocating specific tasks and responsibilities to them.

Training

The process of improving a worker’s skills.

Promotion

The advancement of an employee in an organisation to a higher job/managerial level.

Organisational structure

The levels of management and division of responsibilities within the organization.

Organisational chart

A diagram that outlines the internal management structure.

Hierarchy

The levels of management in any organization, from the highest to the lowest.

Level of hierarchy

Managers, supervisors, or other employees who are given a similar level of responsibility in an organization.

Chain of command

The structure in an organization which allows instructions to be passed down from senior management to lower levels.

Span of control

The number of subordinates working directly under a manager.

Directors

Senior managers who lead a particular department or division of a business.

Line managers

People who have a direct responsibility for people below them in the hierarchy of an organization.

Supervisors

Junior managers who have direct control over the employees below them in an organizational structure.

Staff managers

Specialists who provide support, information, and assistance to line managers.

Delegation

Giving a subordinate the authority (but not responsibility) to perform particular tasks.

Leadership styles

The different approaches to dealing with people and making decisions when in a position of authority.

Autocratic leadership

When the manager expects to be in charge of the business and to have their orders followed.

Democratic leadership

When the manager gets other employees involved in the decision-making process.

Laissez-faire leadership

When the manager makes broad objectives known, but leaves employees to make decisions and organize their own work.

Trade union

A group of employees who have joined together to ensure their interests are protected.

Closed shop

When all employees must be a member of the same trade union.

Recruitment

The process from identifying that the business needs to employ someone up to the point at which applications have arrived at the business.

Employee selection

The process of evaluating candidates for a specific job and selecting an individual for employment based on the needs of the organisation.

Job analysis

It identifies and records the responsibilities and tasks relating to a job.

Job description

It outlines the responsibilities and duties to be carried out by someone employed to do a specific job.

Job/person specification

A document which outlines the requirements, qualifications, expertise, physical characteristics, etc., for a specified job.

Internal recruitment

When a vacancy is filled by someone who is an existing employee of the business.

External recruitment

When a vacancy is filled by someone who is not an existing employee and will be new to the business.

Part-time employment

Often considered to be between 1 and 30–35 hours a week.

Full-time employment

Often considered to be about 35 hours or more a week.

Induction training

An introduction given to a new employee, explaining the business’s activities, customs and procedures and introducing them to their fellow workers.

On-the-job training

Occurs by watching a more experienced worker doing the job.

Off-the-job training

Involves being trained away from the workplace, usually by specialist trainers.

Workforce planning

Establishing the workforce needed by the business for the foreseeable future in terms of the number and skills of employees required.

Dismissal

When employment is ended against the will of the employee, usually for not working in accordance with the employment contract.

Redundancy

When an employee is no longer needed and so loses their job. It is not due to any aspect of their work being unsatisfactory.

Contract of employment

A legal agreement between an employer and employee, listing the rights and responsibilities of workers.

Industrial tribunal

A type of law court/legal meeting that makes judgments on disagreements between companies and their employees (eg. workers’ complaints of unfair dismissal/discrimination at work).

Ethical decision

A decision taken by a manager or a company because of the moral code observed by the firm.

Communication

The transferring of a message from a sender to a receiver, who understands the message.

Message

The information or instructions being passed by the sender to the receiver.