Cambridge IGCSE Business Studies - Fourth Edition - Notes
Introduction and Guidance for Students
This book is designed for Cambridge IGCSE Business Studies students, but it's also useful for Edexcel International GCSE, Cambridge O level, and other GCSE Business Studies.
Valuable for students:
Studying the subject for the first time.
Revising for exams.
Learning independently through distance learning.
The fourth edition includes updated chapters, removal of outdated material, and new content.
How This Book Can Help You
Features in each chapter:
Subject material outline and learning checklist.
Chapter titles matching the Cambridge IGCSE Business Studies syllabus.
Informative and engaging content.
Activities for learning support and progress checks.
Revision summaries using "spider diagrams".
Definitions of important terms.
International business case studies.
Examination-style questions.
Case study examination-style questions covering curriculum sections.
'Tips for success' to highlight key points.
Hundreds of activities for knowledge and skill development.
What is on the CD?
Outline answers to chapter activities.
Sample answers to examination-style questions.
300+ interactive multiple-choice questions.
Revision questions worksheet for each chapter with outline answers.
Glossary of key terms.
Is there a Teacher's CD too?
Available separately (ISBN: 9781444176520).
Provides teachers with:
Answers to all remaining questions.
A scheme of work.
Teaching activities and worksheets.
Sample examination questions with sample answers.
Note: The Teacher's CD has not been through the Cambridge endorsement process.
Exam Preparation and Technique
Revise thoroughly, working through all activities and examination-style questions.
Obtain the syllabus, past papers, and mark schemes.
Check learning progress against the syllabus content.
Know the exam paper details (length, type, style of questions).
Examination Papers for Cambridge IGCSE Business Studies
Paper 1: Data response, 1 hour 30 mins, four data response questions with structured questions.
Paper 2: Case study, 1 hour 30 mins, four structured questions based on a case study.
In the Examination:
Check instructions, length, and number of questions; answer all questions.
Allocate time sensibly; spend more time on questions with higher marks.
Key examination prompt words to know:
What is meant by: Clearly show understanding of the term in a single sentence.
Identify: Write down the required number of points without explanation.
Calculate: Work out the answer using the figures provided.
Explain: Give more detail than just identifying points, apply to the business in question.
Consider: Show advanced skills, explain the advantages and disadvantages, use case material, and compare before concluding.
Recommend: Explain the advantages and disadvantages of different methods, base recommendation on explanations, and explain why other methods are less suitable.
Do you think that… Justify your answer: Explain the advantages and disadvantages of different locations, weigh the points, and come to a final decision based on the most important points.
Emphasize 'application' skills, linking answers to the business in the data or case study.
Finally…
Encourage the development of a real interest in business.
Success in Cambridge IGCSE Business Studies will help in playing a leading role in managing business activity.
Section 1
1 Business activity
Definitions to learn
A need is a good or service essential for living.
A want is a good or service which people would like to have but is not essential for living. People's wants are unlimited.
The economic problem - there exist unlimited wants but limited resources to produce to satisfy those wants. This creates scarcity.
The chapter will explain:
the concept of needs, wants, scarcity and opportunity cost
the factors of production
the development of economic activity and the use of specialisation.
the purpose of business activity
the concept of added value.
The economic problem: needs, wants and scarcity
Probably the really important items are on the needs list - water, clothing for warmth and protection, food and some form of housing or shelter.
That will be up to you and your interests and tastes, but you could probably have written a very long list indeed.
Most people in the world cannot afford to buy everything they want because our wants are unlimited.
In many countries, some people cannot afford to buy the things they need and they are likely to be very poor.
Printing more money does not produce more goods and services. It will just lead to prices rising so more goods cannot be afforded - you just pay more for the same amount of goods.
Limited resources: the need to choose
Factors of production are those resources needed to produce goods or services. There are four factors of production and they are in limited supply.
Land: this term is used to cover all of the natural resources provided by nature and includes fields and forests, oil, gas, metals and other mineral resources.
Labour: this is the number of people available to make products.
Capital: this is the finance, machinery and equipment needed for the manufacture of goods.
Enterprise: this is the skill and risk-taking ability of the person who brings the other resources or factors of production together to produce a good or service. For example, the owner of a business. These people are called entrepreneurs.
In any one country, and in the world as a whole, these factors of production are limited in supply.
All choices involve giving something up - this leads to opportunity cost.
Opportunity cost is the next best alternative given up by choosing another item.
Specialisation: the best use of limited resources
Specialisation occurs when people and businesses concentrate on what they are best at.
Division of labour is when the production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialisation.
Advantages to division of labour:
Workers are trained in one task and specialise in this - this increases efficiency and output
Less time is wasted moving from one workbench to another
Disadvantages to division of labour:
Workers can become bored doing just one job - efficiency might fall
If one worker is absent and no one else can do the job, production might be stopped
The purpose of business activity
Businesses combine factors of production to make products (goods and services) which satisfy people's wants.
Added value
Added value is the difference between the selling price of a product and the cost of bought in materials and components.
Added value is important because sales revenue is greater than the cost of materials bought in by the business. This means the business:
can pay other costs such as labour costs, management expenses and costs such as advertising and power
may be able to make a profit if these other costs total less than the added value.
main ways in which a business can try to increase its added value.
Increase selling price but keep the cost of materials the same.
Reduce the cost of materials but keep the price the same.
2 Classification of businesses
Differences between primary, secondary and tertiary production.
why the importance of these business activities varies between countries and over time
the differences between public sector and private sector businesses in mixed economies
Stages of economic activity
The primary sector of industry extracts and uses the natural resources of the earth to produce raw materials used by other businesses.
The secondary sector of industry manufactures goods using the raw materials provided by the primary sector.
The tertiary sector of industry provides services to consumers and the other sectors of industry.
Relative importance of economic sectors
The three sectors of the economy are compared by:
percentage of the country's total number of workers employed in each sector
value of output of goods and services and the proportion this is of total national output.
In some countries, primary industries such as farming and mining employ many more people than manufacturing or service industries. These tend to be often called developing countries.
In countries which started up manufacturing industries many years ago, the secondary and tertiary sectors are likely to employ many more workers than the primary sector.
In economically developed countries, it is now common to find that many manufactured goods are bought in from other nations. Most of the workers will be employed in the service sector.
Changes in sector importance
De-industrialisation occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country.
There are several reasons for changes in the relative importance of the three sectors over time.
Sources of some primary products, such as timber, oil and gas, become depleted.
Most developed economies are losing competitiveness in manufacturing to the newly industrialised countries such as Brazil, India and China.
As a country's total wealth increases and living standards rise, consumers tend to spend a higher proportion of their incomes on services such as travel and restaurants than on manufactured products produced from primary products.
Mixed economy
A mixed economy has both a private sector and a public (state) sector.
nearly every country in the world has a mixed economy with a:
private sector - businesses not owned by the government. These businesses will make their own decisions about what to produce, how it should be produced and what price should be charged for it. Most businesses in the private sector will aim to run profitably.
public sector - government- or state-owned and controlled businesses and organisations. The government, or other public authority, makes decisions about what to produce and how much to charge consumers. Some goods and services are provided free of charge to the consumer, such as state health and education services. The money for these comes not from the user but from the taxpayer.
In recent years, many governments have changed the balance between the private sector and the private sector in their economies by selling some public sector businesses - owned and controlled by government - to private sector businesses. This is called privatisation.
3 Enterprise, business growth and size
This chapter will explain:
the importance of enterprise to new businesses
the key characteristics of successful entrepreneurs
the importance of a business plan to an entrepreneur
how to measure and compare the size of businesses
how business can expand internally and by merger and takeover
why some businesses remain small and why some businesses fail.
Enterprise and entrepreneurship
Entrepreneur is a person who organises, operates and takes the risk for a new business venture.
Benefits of being an entrepreneur
independence - able to choose how to use time and money
able to put own ideas into practice
may become famous and successful if the business grows
may be profitable and the income might be higher than working as an employee for another business
able to make use of personal interests and skills
Disadvantages of being an entrepreneur
risk - many new entrepreneurs' businesses fail, especially if there is poor planning
capital - entrepreneurs will have to put their own money into the business and, possibly, find other sources of capital
lack of knowledge and experience in starting and operating a business
opportunity cost - lost income from not being an employee of another business
Characteristics of successful entrepreneurs
Hard working
Risk taker
Creative
Optimistic
Self-confident
Innovative
Independent
Effective communicator
Most governments offer support to entrepreneurs to set up new businesses:
Reduce unemployment - new businesses will often create jobs to help reduce unemployment.
Increase competition - new businesses give consumers more choice and compete with already established businesses.
Increase output - the economy benefits from increased output of goods and services.
Benefit society - entrepreneurs may create social enterprises which offer benefits to society other than jobs and profit (for example, supporting disadvantaged groups in society).
Can grow further - all large businesses were small once!
Enterprise and entrepreneurship
A business plan is a document containing the business objectives and important details about the operations, finance and owners of the new business.
A bank will almost certainly ask an entrepreneur for a business plan before agreeing to a loan or overdraft to help finance the new business.
Comparing the size of businesses
Capital employed is the total value of capital used in the business.
Business size can be measured in a number of ways. The most common are:
number of employees
value of output
value of sales
value of capital employed.
Why do owners often want their businesses to grow?
the possibility of higher profits for the owners
more status and prestige for the owners and managers - higher salaries are often paid to managers who control the bigger firms
lower average costs
larger share of its market
How can businesses grow?
Businesses can expand in two main ways:
by internal growth, for example, a restaurant owner could open other restaurants in other towns - this growth is often paid for by profits from the existing business. This type of growth is often quite slow but easier to manage than external growth
by external growth, involving a takeover or a merger with another business.
Internal growth occurs when a business expands its existing operations.
External growth is when a business takes over or merges with another business. It is often called integration as one firm is integrated into another one.
A merger is when the owners of two businesses agree to join their firms together to make one business.
A takeover or acquisition is when one business buys out the owners of another business which then becomes part of the 'predator' business (the firm which has taken it over).
Horizontal integration is when one firm merges with or takes over another one in the same industry at the same stage of production.
Vertical integration is when one firm merges with or takes over another one in the same industry but at a different stage of production. Vertical integration can be forward or backward.
Conglomerate integration is when one firm merges with or takes over a firm in a completely different industry. This is also known as diversification.
Problems of business growth - and how to overcome them
Not all business expansion leads to success. There are several reasons why business expansion can fail to increase profit or achieve the other objectives set by managers.
Why do some businesses stay small?
Not all businesses grow. Some stay small, employing few people and using relatively little capital. There are several reasons why many businesses remain small:
the type of industry the business operates in
the market size
the owners' objectives.
Why some businesses fail
The rate of failure of newly formed businesses is high - in some countries, over 50 per cent close within five years of being set up.
The main reasons why some businesses fail are:
Poor management
Failure to plan for change
Poor financial management
Over-expansion
Risks of new business start-ups
4 Types of business organisation
This chapter will explain:
the main forms of business organisation in the private and public sectors
the advantages and disadvantages of each of these forms of business organisation
how appropriate each of these forms are in different circumstances
business organisations in the public sector.
Business organisations: the private sector
Sole trader is a business owned by one person.
Benefits of being a sole trader:
There are few legal regulations
He is his own boss.
He has the freedom to choose his own holidays, hours of work, prices to be charged and whom to employ (if he finds that he could not do all the work by himself).
Mike has close contact with his own customers, the personal satisfaction of knowing his regular customers and the ability to respond quickly to their needs and demands.
He has an incentive to work hard as he is able to keep all of the profits, after he pays tax. He does not have to share these profits.
He does not have to give information about his business to anyone else - other than the Tax Office. He enjoys complete secrecy in business matters.
Disadvantages to being a sole trader:
I have no one to discuss business matters with as I am the sole owner.
I do not have the benefit of limited liability.
The sources of finance for a sole trader are limited to the owner's savings, profits made by the business and small bank loans. There are no other owners who can put capital into the business.
My business is likely to remain small because capital for expansion is so restricted.
If I am ill there is no one who will take control of the business for me.
There is no continuity of the business after the death of the owner.
Partnership is a form of business in which two or more people agree to jointly own a business.
A partnership agreement is the written and legal agreement between business partners. It is not essential for partners to have such an agreement but it is always recommended.
advantages of a partnership
More capital could now be invested into the business from Gita's savings and this would allow expansion of the business. Additional taxis could now be purchased.
The responsibilities of running the business were now shared. Gita specialised in the accounts and administration of the business. Mike concentrated on marketing the services of the taxi firm and on driving.
Absences and holidays did not lead to major problems as one of the partners was always available.
Both partners were motivated to work hard because they would both benefit from the profits. In addition, any losses made by the business would now be shared by the partners.
Disadvantages of a partnership
-The partners did not have limited liability.The business did not have a separate legal identity.
Partners can disagree on business decisions and consulting all partners takes time.
If one of the partners is very inefficient or actually dishonest, then the other partners could suffer by losing money in the business.
Most countries limit the number of partners to 20 and this means that business growth would be limited by the amount of capital that 20 people could invest.
An unincorporated business is one that does not have a separate legal identity. Sole traders and partnerships are unincorporated businesses.
Incorporated businesses are companies that have separate legal status from their owners.
Shareholders are the owners of a limited company. They buy shares which represent part ownership of a company.
Private limited companies
A company is a separate legal unit from its owners - they are incorporated businesses.
a company exists separately from the owners and will continue to exist if one of the owners should die
a company can make contracts or legal agreements
company accounts are kept separate from the accounts of the owners.
Shareholders appoint directors to run the business.
Advantages of a private limited company
Shares can be sold to a large number of people
All shareholders have limited liability.
The people who started the company are able to keep control of it as long as they do not sell too many shares to other people.
Disadvantages of a private limited company
legal formalities which have to be dealt with before a company can be formed such as The Articles of Association and The Memorandum of Association.
The shares in a private limited company cannot be sold or transferred to anyone else without the agreement of the other shareholders.
The accounts of a company are less secret than for either a sole trader or a partnership.
it will not be possible to raise really large sums of capital for rapidly expanding businesses
Public limited companies
This form of business organisation is most suitable for very large businesses.
Advantages of a public limited company
still offers limited liability to shareholders.
Incorporated business and is a separate legal unit.
opportunity to raise very large capital sums to invest in the business.
no restriction on the buying, selling or transfer of shares.
A business usually has high status and should find it easier to attract suppliers.
Disadvantages of a public limited company
legal formalities of forming such a company are quite complicated and time consuming.
regulations and controls over public limited companies
some public limited companies grow so large that they become difficult to control and manage.
There is a very real danger that although the original owners of the business might become rich by selling shares in their business they may lose control over it when it 'goes public'.
Annual General Meeting is a legal requirement for all companies that shareholders may attend.
Dividends are payments made to shareholders from the profits (after tax) of a company
Other private sector business organisations
Joint Ventures, franchising
Business organisations in the public sector
Public corporations
Advantages of public corporations
Some industries are considered to be so important that government ownership is thought to be essential.
If industries are controlled by monopolies because it would be wasteful to have competitors, then these natural monopolies are often owned by the government.
If an important business is failing and likely to collapse, the government can step in to nationalise it.
Important public services, such as TV and radio broadcasting, are often in the public sector.
Disadvantages of public corporations
There are no private shareholders to insist on high profits and efficiency. The profit motive might not be as powerful as in private-sector industries.
Government subsidies can lead to inefficiency as managers will always think that the government will help them if the business makes a loss.
Often there is no close competition to the public corporations.
Governments can use these businesses for political reasons
5 Business objectives and stakeholder objectives
Business objectives are the aims or targets that a business works towards.
benefits of setting objectives are:
They give workers and managers a clear target to work towards and this helps motivate people.
Taking decisions will be focused on: 'Will it help achieve our objectives?'
Clear and measurable objectives help unite the whole business towards the same goal.
Business managers can compare how the business has performed with their objectives to see if they have been successful or not.
the most common objectives for businesses in the private sector are to achieve:
business survival
profit
returns to shareholders
growth of the business
market share
service to the community.
Profit is total income of a business (sales revenue) less total costs.
When a business is owned by private individuals rather than the government it is usually the case that the business is operated with the aim of making a profit.
When a business has recently been set up, or when the economy is moving into recession, the objectives of the business will be more concerned with survival than anything else.
Market share is the proportion of total market sales achieved by one business.
A social enterprise has social objectives as well as an aim to make a profit to reinvest back into the business.
Social enterprises set three objectives for their business:
social: to provide jobs and support for disadvantaged groups in society, such as the disabled or homeless
environmental: to protect the environment
financial: to make a profit to invest back into the social enterprise to expand the social work that it performs.
A stakeholder is any person or group with a direct interest in the performance and activities of a business.
Most likely objectives for the stakeholder group
Owners: share of the profits so that they gain a rate of return on the money put into the business, growth of the business so that the value of their investment increases
Workers: regular payment for their work, contract of employment, job security
Managers: high salaries because of the important work they do, job security, growth of the business so that managers can control a bigger and better known business.
Customers: safe and reliable products, value for money, well-designed products of good quality, reliability of service and maintenance
Government: want businesses to succeed in their country so they'll employ workers, pay taxes and increase the country's output
the whole community: production that does not damage the environment, safe products that are socially responsible
Banks: expect the business to be able to pay interest and repay capital lent - business must remain liquid
There can be objective conflict between stakeholders
Section 2
6 Motivating workers
This chapter will explain:
why people work and motivation theories
what are the factors that motivate workers (financial and non-financial rewards)
job satisfaction.
Why people work
The reasons why people work are summarised in the diagram below.
Money: to pay for necessities and some luxuries
Security: a sense of security -- you are not likely to lose your job
Social needs (affiliation): feeling part of a group or organisation, meeting people, making friends at work
Esteem needs (self-importance): feeling important, feeling that the job you do is important
Job satisfaction enjoyment is derived from feeling that you have done a good job
Motivation theories
Frederick Taylor started his working life as a labourer but based his ideas on the assumption that all individuals are motivated by personal gain and therefore, if they are paid more, they will work more effectively.
his ideas were too simplistic - employees are motivated by many things and not just money
you can pay an employee more money, but if they are unfulfilled by their work in some way, there will be no increase in their effectiveness at work and there will be no productivity gains
a practical problem arises if you cannot easily measure an employee's output.
Abraham Maslow studied employee motivation and proposed a hierarchy of needs
Physiological needs: food, rest, recreation shelter.
Safety/Security needs: protection against danger, protection against poverty, fair treatment.
Social needs: friendship, a sense of belonging to a team.
Esteem needs: having status and recognition, achievement, independence, successful in your potential and a feeling of a good job rather than financials.
Frederick Herzberg's motivation theories were based on his study of work on engineers and accountants in the US. According to Herzberg, humans have two sets of needs; one is for the basic animal needs, which he called 'hygiene' factors or needs, and the second is for a human being to be able to grow psychologically, which he called 'motivational' needs or 'motivators'.
-- Motivatorsachievement
recognition
personal growth/development
advancement/promotion
work itself
Hygiene (or maintenance) factors
status
security
work conditions
company policies and administration
relationship with supervisor
relationship with subordinates
salary
, if they are not satisfied, they can act as demotivators to the worker. However, they do not act as motivators, as once satisfied the effects of them quickly wear off. True motivators are found in other factors
Characteristics of successful entrepreneurs
Hard working
Risk taker
Creative
Optimistic
Self-confident
Innovative
Independent
Effective communicator
Most governments offer support to entrepreneurs to set up new businesses:
Reduce unemployment - new businesses will often create jobs to help reduce unemployment.
Increase competition - new businesses give consumers more choice and compete with already established businesses.
Increase output - the economy benefits from increased output of goods and services.
Benefit society - entrepreneurs may create social enterprises which offer benefits to society other than jobs and profit (for example, supporting disadvantaged groups in society).
Can grow further - all large businesses were small once!
A business plan is a document containing the business objectives and important details about the operations, finance and owners of the new business.
A bank will almost certainly ask an entrepreneur for a business plan before agreeing to a loan or overdraft to help finance the new business.
Comparing the size of businesses
Capital employed is the total value of capital used in the business.
Business size can be measured in a number of ways. The most common are:
number of employees
value of output
value of sales
value of capital employed.
to the relative size of each economic sector
why division of labour or specialisation could be used to make either bread or clay pots and an analysis of the possible advantages/disadvantages of the same to that business.
, why governments support business start-ups and the measures, both business and governmental, that are essential in a start-up business plan.
why entrepreneurs and their characteristics are important, in particular their support of business start-ups.
benefits relating to business plans and what is required of all members of the business
how each measure of business size is measured in terms of value of output, number of employees etc. and who would find it useful to compare such values
and the two main ways in which the business can grow whether it be internally or by takeover and merger and reasons why management want their businesses to grow.and the possible problems regarding the same.
Reasons for success may be due to good management, clear financial controls in terms of cash flow and the importance of financial management. However over expansion might be a detrimental result of said management.
limited liability.
takeover
Motivating factors - financial rewards/motivators
are often paid. The more sales they make the more money they are paid - similar to piece rate.
This encourages the sales staff to sell as many products as possible.
employees receive a share of the profits in addition to their basic salary.
This will motivate the workers to work hard as they all receive a share of the profits earned by the business.
a lump sum paid to workers when they have worked well.
a system of appraisal where performance related pay is linked to the effectiveness of the workers. A common method of doing this is to have an observation from their superior in how they carry about their tasks, speaking to their colleagues and discussing the worker’s current progress
and gives a share in the business in the form of stocks to the employees where they’ll receive dividends if the business performs well and share price will increase giving a level of part ownership and security
Motivating factors - non-financial rewards/motivators
Fringe benefits are non-financial rewards given to employees Such rewards may include:
company vehicle (car)
discounts on the firm's products
health care paid for
children's education fees paid
free accommodation
share options (where company shares are given to employees)
generous expense accounts (for food and clothing)
pension paid for by the business
free trips abroad/holidays.
Job satisfaction
Job satisfaction is the enjoyment derived from feeling that you have done a good job.
Individual employees will have different ideas about which of these is the most important. You have to cater to each type of worker and not assume all workers want the same things for example, compare a nurse with a machine operator in a factory.
Some possible answers might be (as I can’t cater for every response) that nurses like being recognised and respected for their work and being able to help people. A machine operator could want more responsibility and different activities
A manager should design jobs and roles that lead to recognition, higher human needs to allow employees to get more done
Jobs can also to be broken into sub-components allowing employee’s autonomy, allowing group work and better skills
Job satisfaction - the methods
Job rotation involves workers swapping round and doing each specific task for only a limited time
-Job enlargement is where extra tasks of a similar level of work are added to a worker's job description.
-Job enrichment involves looking at jobs and adding tasks that require more skill and/or responsibility
-Autonomous work groups/or team working - giving the team responsibility for a particular process or development
7 Organisation and management
Organisational structure refers to the levels of management and division of responsibilities within an organisation.
Organisation charts
organisational chart for a business, the following is needed:
It is a hierarchy.
It is organised into departments.
As there are different levels of management, there is a chain of command
Advantages of an organisation chart
-The chart shows how everybody is linked together in the organisation.
-Every individual can see their own position in the organisation.
-It shows the links and relationship between different departments within the organisation.
-Everyone is in a department and this gives them a sense of belonging.
-Span of Control is the number of subordinates working directly under a manager
In the organization There is no perfect organisational structure, therefore some levels are to be removed creating a decentralisation effect with good to clear communication.
The chain of command is the structure in an organisation which allows instructions to be passed down from senior management to lower levels of management.
There is therefore an important link between the span of control and the chain of command.
Roles, responsibilities and inter-relationships between people in organisations
Line managers have direct responsibility over people below them in the hierarchy of an organisation. . They have the authority to give orders and to have their decisions put into effect in their department.
-Staff managers are specialists who provide support, information and assistance to line managers.
the responsibilities can overlap across both roles.
The role of management
All organisations, including businesses, have managers. They, at some time, have to fulfil the functions discussed in that chapter, the key aspects of which, include
Planning, Organising , Coordinating, Commanding and Controlling with an explanation of each
An effective manager ensures the following
A sense of control of direction
Coordination between departments, leading to wastage of effort
Control of employees
organisation of resources, leading to low output and sales.
Delegation
Delegation means giving a subordinate the authority to perform particular tasks.
Advantages of delegation for the manager
Managers cannot do every job themselves.
Managers are less likely to make mistakes if some of the tasks are being performed by their subordinates.
Managers can measure the success of their staff more easily.
Advantages of delegation for the subordinate
The work becomes more interesting and rewarding.
The employee feels more important and believes that trust is being put in them to perform a job well.
Delegation helps to train workers and they can then make progress in the organisation
Why might a manager not delegate?
Despite the advantages of delegation, there are some managers who are reluctant to delegate. Some may be afraid that the subordinates might fail and the manager wants to control everything by themselves. Also, there is a risk that the subordinates might do a better job than the manager. This could make the manager feel very insecure.
Need to reduce control of employees ,
Reduce in direct control by supervisors ,
Increased trust of workers
Make up for this by promoting a well built working relations between all colleagues and sub roles