IGCSE Business Studies Flashcards

Flashcards covering key concepts from the IGCSE Business Studies syllabus.

What is a business?

An organisation that provides goods and services.

Define goods.

Physical products (phones, crisps, shoes, etc.).

Define services.

Non-physical products (banking, car washing, waste disposal, etc.).

What are consumer goods?

Goods and services sold to ordinary people.

What are producer goods?

Goods and services produced by one business for another.

What are needs?

Basic requirement for human survival (food, water, warmth, etc.).

What are wants?

People’s desire for goods and services (holidays, better house, bigger car, etc.).

What is a private enterprise?

Owned by individuals or groups of individuals. They are private sector businesses. Main objective is to make money (profit).

What is a social enterprise?

Non-profit organisations in the private sector. Examples include charities, pressure groups, clubs and societies.

What is a public enterprise?

Provided by organisations owned by the central/local government. Often providing healthcare, education, mail, policing, etc. Main purpose is to provide goods and services that private enterprises fail to provide.

What is a stakeholder?

An individual/group of individuals interested in the operation of a business

Who are owners in a business context?

Often called entrepreneurs. Responsible for setting up and running the business. Larger businesses (Ltd.’s) are owned by shareholders, that invest money in a business and get a share of the profit (dividend).

What do customers want?

Good quality products at a fair price.

What do employees want?

Good working conditions, fair pay and benefits.

What is the role of managers?

Help to run most businesses. Employed to run departments, lead teams, solve problems, settle disputes, motivate workers, etc.

Who are financiers?

Lend money to a business. Could be banks, family members or private investors. Have a financial interest in the business to do well.

What do suppliers want?

Good prompt payments, and regular orders.

How does a successful business benefit the local community?

A business may employ many people in local communities, so a business doing well will benefit the community.

How do businesses benefit the government?

Businesses provide employment, generate wealth and pay taxes. Taxes from businesses are used to finance government spending.

Give an example of a financial objective.

An objective for businesses may be to survive the first 12 months.

Why might the survival of a business be threatened?

When trading conditions become difficult or if a strong competitor emerges.

What is profit maximisation?

Making as much profit as possible in a given time period

How do businesses benefit from selling large of sales?

Businesses can enjoy lower costs, have a larger market share, and generate more wealth for owners.

What is profit satisficing?

Making enough profit to satisfy the needs of the business owner/s

Give an example of a social objective

designed to improve human well-being. Examples may include reducing time by the emergency services or increasing recycling rates. Social enterprises also aim to improve human and environmental wellbeing.

What is a non-financial objective relating to personal satisfaction?

Many business owners set up businesses because they think they’ll be happier in their work environment than working for an employer. Some owners may have developed their hobby into a business.

What is a non-financial objective relating to challenge?

People are motivated by challenges. Even if successful, owners might set up new challenges for their business (example: investing into new products)

What is a non-financial objective relating to independence and control?

Some people want to be “their own boss”. This is an important non-financial objective for many business owners as they are driven by the desire to be independent and take control.

List 5 reasons why objectives might change as businesses evolve.

Market conditions change or become difficult; Technology develops; Performance of business can change; Legislation; Internal reasons (change in ownerships, change in senior management, etc.)

What is an entrepreneur?

People who set up businesses. They’re innovators, organizers, risk takers and decision makers.

What does unincorporated mean?

Businesses where there is no legal difference between owner and business.

What does incorporated mean?

Business has a separate legal identity from that of its owner/s.

What is unlimited liability?

Owner of business is personally liable for all business debts.

List the advantages of being a sole trader.

Owner keeps all profit; Independence and control; No legal requirements; Flexibility; May qualify for government help

List the disadvantages of being a sole trader.

Unlimited liability; May struggle to raise finance; Long hours; Can’t exploit economies of scale

List the advantages of partnerships.

Easy to set up; Partners can specialize in areas; More capital can be raised; Financial information not published

List the disadvantages of partnerships.

Unlimited liability; Profit is shared; Partners may disagree and fall out; Partner decisions are legally binding

What is deed of partnership?

Biding legal document that states the formal rights of partners - how much capital partners will contribute; how profits/losses will be shared; procedure for ending partnerships; rules for taking on new partners

What is a limited partnership?

Partnership where some partners contribute capital and enjoy a share of the profit, but don’t take part in running the business.

What does a franchisor offer?

A license to trade under its name; Start-up package with help, advice and essential equipment; Training; Marketing support; An exclusive geographic area

What kind of fees do franchisees pay?

One-off start-up fee; Ongoing fee; Franchisors may make profit on some of the materials supplied

List some advantages to the franchisee

Less risk; Back up support; Set up costs are predictable; Marketing

List some disadvantages to the franchisee

Profits shares; Strict contracts; Lack of independence; Expensive to start

List some advantages to the franchisor

Fast growth; Cheaper growth; Franchisees take some risk; Franchisees more motivated

List some disadvantages to the franchisor

Potential profit is shared; Can damage brand reputation; Cost of support may be high

What do social enterprises aim to do?

Improve human and environmental well-being

What is a cooperative?

Company, factory or organisation in which the people working there own an equal share of it

What is a consumer cooperative?

Owned by its customers

What is a worker cooperative?

Owned by its employees

What are charities?

Organisations that give money, goods, or help to people who are poor, sick or in need. Also raise awareness on issues.

List 5 of the main features of limited companies:

Incorporated; Raise capital by selling shares; Shareholders are joint owners of the company; Shareholders elect directors to run company, headed by a chairperson; Pay corporation tax on profits

List 2 of the documents required when forming a limited company:

Memorandum of association and articles of association

What does memorandum of association do?

Sets out the constitution and gives details about the company, including: name, address of registered office, objectives, amount of capital raised, number of shares issues, etc.

What does articles of association do?

Deals with internal running of the company, including: rights of shareholders, procedure for appointing directors, length of time directors should serve, etc.

Give an advantage of private limited companies:

Limited liability

Give a disadvantage of private limited companies:

Financial information has to be made public.

What is something that public limited companies can do that private limited companies cannot?

Their shares can be bought and sold by the public on the stock exchange

Give an advantage of public limited companies:

Large amounts of capital can be raised.

Give a disadvantage of public limited companies:

Setting up is expensive.

What is a multinational?

Large business with significant production or service operations in at least two different countries.

List 5 of the main features of multinationals:

Huge assets (land, buildings, plants, machinery, etc.); Highly qualified and experienced professional executives and managers; Powerful advertising and marketing capabilities; Highly advance and up-to-date technology; Highly influential economically and politically.

List 6 of the main features of public corporations:

State owned; Created by law/ act of parliament; Incorporated; State-funded; Provide public services; Public accountability

List 4 reasons for the public ownership of businesses:

Avoid wasteful duplication in industries; Maintain control of strategic industries; Save jobs from failing private sector businesses; Fill in the gaps left by the private sector in less profitable areas

List 4 reasons against the public ownership of businesses

Costs to government, these have to be met by taxpayers; Inefficiency as there is a lack of competition and the absence of profit as an objective; Political interference; Difficult to control due to size

What is privatisation?

Transfer of public sector resources to the private sector

List 4 examples of privatisation

Sale of public corporations (sell shares in the business to anyone that wants them); Deregulation and lifting legal restrictions that prevented private sector competition; Contracting out to private sector businesses (contractors get a change to bid); The sale of land and property

List 4 reasons why privatisation takes place:

To generate income for the government; To reduce inefficiency in the public sector; As a result of deregulation; To reduce political interference

What is the primary sector?

Production involving the extraction of raw materials from the earth

What is the secondary sector?

Production involving the conversion of raw materials into finished and semi-finished goods

What is the tertiary sector?

Production of services in the economy

Define what it means for sectors to be interdependent.

all three sectors rely on each other

List 3 of the reasons sectors change:

People may prefer to spend more of their income on services than goods; Decline in demands for goods in traditional industries; Competition in production of manufactured goods

List 4 proximity decisions businesses take into consideration:

Proximity to the Market; Proximity to Labour; Proximity to Materials; Proximity to Competitors

What is a trade bloc?

Group of countries situated in the same region that join together and enjoy trade free of barriers.

What is globalisation?

Growing integration of the world’s economies

What is intellectual property?

People’s knowledge/creative ideas that have commercial value and are protectable under different forms of copyright.

List 5 reasons for globalisation:

Technology; Transport; Deregulation; Consumer Preferences; Market Saturation

List 4 opportunities of globalisation for businesses:

Access to Larger Markets; Lower Costs; Access to Labour; Reduced Taxation

List 3 threats of globalisation to businesses:

Competition; International Takeovers; Increased Risk of External Shocks

List benefits to a country/economy of multinational companies:

Increase in Income and Employment; Increase in Tax Revenue; Increase in Exports; Transfer of Technology; Improvement in the Quality of Human Capital; Enterprise Development

What is visible trade?

Trade in physical goods

What is invisible trade?

Trade in services

What is balance of trade?

difference between visible exports and visible imports

What is exchange rate?

the rate at which one currency will be exchanged for another currency

What is fiscal policy?

The governments use of taxation and public spending to influence a nation’s economic performance.

List 3 ways governments can affect business activity:

Change the law; Influence rate of interest and exchange rates in the economy; Change levels of government expenditure and taxation

List 3 ways that governments intervene to protect stakeholders

Consumer protection; Competition Policy; Environmental Legislation

What is protectionism?

Use of trade barriers to protect domestic producers

What are infant industries?

New industries that are yet to be established

What is monetary policy?

Using changes in interest rates and the money supply to manage the economy.

List examples of external factors when running a business:

Social; Technology; Environmental; Political

List 4 measures of success in business:

Revenue; Market Share; Customer Satisfaction; Profit

List 5 reasons for business failure:

Cash Flow Problems; Lack of Finance; Not Competitive; Failure to Innovate; Poor Leadership

What is communication?

Sending and receiving information

What are communication channels?

Routes along which information might travel in a business.

What is internal communication?

Communication between people inside the business.

What is external communication?

Communication between the business and those outside such as customers, investors or the authorities.

What is formal communication?

Use of recognized channels when communicating.

What is informal communication?

Use of non-approved channels when communicating.

List 5 methods of communication:

Face-to-Face Communication; Written Communication; Electronic Communication; Email; Internet