Business management textbook summary (IB MYP and ICGSE)
10 views 0 purchase
Module
Business Management
Institution
Sixth Year / 12th Grade
Book
Cambridge IGCSE and O Level Business Studies 5th edition
This business management textbook summary is an excellent source of revision for IB middle years program and IGCSE. Written by a past student who obtained 50/56 in MYP e-assessments and 7/7 in Business Management, it provides a summary of all necessary textbook definitions and applications in a det...
CAIE IGCSE Business Studies (0450) Full Summary Notes
Summary Cambridge IGCSE Business Studies 5th edition, ISBN: 9781510421233 Business
All for this textbook (3)
Written for
Secondary school
Business Management
4
All documents for this subject (4)
Seller
Follow
luciadao
Content preview
Section 1 - Understanding Business Activity Factors of Production:
➔ Land: Any natural resource that is provided by nature. Eg. oil,
_____________________________________________
gas, metal, fields, forests and other mineral resources.
➔ Labour: The number of people available to make products.
Economic Problem → There exists unlimited wants ➔ Capital: The finance, machinery and equipment that is needed to
however, limited resources to produce the goods and services manufacture the goods.
to satisfy those wants. ➔ Enterprise: The skills and the risk taking abilities of the person that
brings all the factors of production together to produce a good or a
service. Eg. The owner of the business (entrepreneur).
Factors of production → The resources that are needed to
produce the goods and services. There are 4 factors of Specialisation is very common now because:
production. ➔ Specialised machinery and technologies are now widely available.
➔ Increasing competition means that businesses have to keep low
costs and specialisation allows this.
Opportunity Cost → The next best alternative given up when ➔ People recognise that higher living standards can result from being
choosing another item. specialised.
Advantages and Disadvantages of Specialisation:
Specialisation → When people in a business concentrate on
what they are best at. Advantages:
➔ Workers are trained in one task thus increasing efficiency.
Division of Labor → This is a form of specialisation. When ➔ It is quicker and cheaper to train new workers meaning less time is
wasted.
the production process is split up into different tasks. Each
➔ It increases the quality of the outputs.
worker focuses on a different task. ➔ Less time is needed to move from one workbench to another.
Added Value → The difference between the selling price of Disadvantages:
➔ It can create monogamy and boredom thus decreasing motivation.
the product and the cost of production.
➔ If one worker is absent then it will cause the whole process to slow
down or even shut down as no one else can do the job.
Primary Sector → Industry that focuses on extracting and
using natural resources of the Earth to produce raw material How could a business increase added value?
➔ Increasing selling price but keeping the cost of the materials the
to be used by other businesses.
same.
This might be done if a company wants to create a higher quality image for its
Secondary Sector → Industry that focuses on manufacturing product. Consumers might be willing to pay the higher prices for the same
the foods provided by the primary sector. quantity. However, other costs could increase as the business is trying to
create the high quality image.
Eg. A Jewellery store could re-decorate, improve packaging etc to make the
Tertiary Sector → The industry that provides the goods and brand appear more luxurious.
services to consumers and other sectors of the Industry. ➔ Reducing the cost of production but keeping the selling prices the
same.
Costs of producing the goods can help to add value however. Eg. A building
De-industrialisation → When there is a decline in the
firm could use cheaper building materials. However, reducing the cost of
importance of the Secondary sector in the country. materials could result in a lower quality of product. Some customers might
not be willing to pay the same price for a product that they believe is of lower
Mixed Economy → A mixed economy has both the private quality.
➔ Building a brand reputation
and the public sector.
➔ Improving customer service
_________________________________________________ ➔ Adding product features and benefits
➔ Offering convenience
Entrepreneur → The person that organises, operates and
Contents of a Business Plan:
takes risks for a new business.
1. Description of the Business
2. Products and services
Business Plan → A plan that outlines the business's 3. The market
objectives and important details about the business 4. Business location and how products will reach customers
5. Organisation structure and management
operations finance and the owners of the Business.
6. Financial information
7. Business strategy
Capital employed → The total value of capital used in the
business.
,Capital intensive → Business that requires large amounts of Why governments support business startups:
➔ To reduce unemployment
investment and machinery to produce their output.
➔ To increase competition - They give consumers more choice.
➔ To benefit society - social enterprises which offer benefits to
Labour intensive → Business that requires large numbers of society.
people to produce their goods. ➔ To help companies possibly become very large and important in
the future.
Internal Growth → When the business expands its existing How do governments support business startups:
operations. ➔ Organising training for entrepreneurs to give advice as well as
support sessions offered by experienced business people.
➔ Offering Enterprise zones which provide low cost premises for
Horizontal integration → When a business takes over or
startup businesses.
mergers with another business in the same industry and at ➔ Loans for small businesses
the same stage of production. ➔ Grants to small businesses to train employees and help increase
their productivity.
Vertical integration → When a business takes over or ➔ Encouraging universities to make their research facilities available
to new business entrepreneurs.
merges with another business in the same industry but at a
different stage of production. This can be forward or Methods of measuring business size:
backwards.
Method Used in Disadvantages
Conglomerate integration → When a business takes over or Number of - Some firms use production methods that
people require less people but produce high
merges with another business in a completely different employed output levels. Eg. Automated factories.
industry.
Value of When comparing the It might not be accurate when comparing
sales size of retailing business size for companies that sell very
Diversification → A strategy that involves entering into a businesses, different products. Eg. A sweet shop and
especially retailers an expensive shoes shop.
new market or industry, one that the business is not currently selling similar
products.
in.
Value of Used to compare A high output level does not always mean
output business sizes in the that the business is large when using other
same industry methods of measuring a business.
especially in
manufacturing
industries.
Value of - Similar problem to the one of ‘number of
capital people employed. Eg. They use little
employed capital equipment but employ a log of
people.
Who would be interested in comparing business sizes?:
➔ Investors - before deciding if they want to invest in the business.
➔ Government - because of the different tax rates for smaller and
larger businesses.
➔ Competitors - to compare their size and importance with other
businesses.
➔ Workers - to gain an insight with how many people they might be
working with.
➔ Banks - to see how important a loan to the business is compared to
its overall size.
Integration:
Type of Advantages
integration
Horizontal - Reduces the amount of competitors in the industry.
integration - More opportunities for economies of scale.
- The combined business will have a bigger share of the
total market than either business before the integration.
, Forward - The merger gives an assured outlet for its product.
vertical - Profit margin made by the retailer is absorbed by the
integration expanded business.
- The retailer could be prevented from selling competing
products.
- Information about consumer needs and preferences can
be obtained.
Backward - The merger gives an assured supply of important
vertical components.
integration - Profit margin of suppliers is absorbed by the expanded
business.
- The supplier could be prevented from supplying other
companies.
- Costs of components and supplies can be controlled.
Conglomer - Because the business has diversified and has activities in
ate more than one industry, this means that it can spread the
integration risks taken by the business.
- Transfer of ideas between different sections of the
business even though they operate in different industries.
_________________________________________________ Disadvantages of business expansion:
➔ Larger businesses are harder to control
➔ Larger businesses can lead to poor communication
Sole trader → A business owned by one person. ➔ Expansion costs so much that business could be short of
finance
Partnership → A formal arrangement between two or more ➔ There could be problems with the management styles and
people that agree to jointly own a business. ways of doing things in either business.
Why do some businesses remain small?”
Partnership agreement → Written and legal agreements ➔ The type of industry the business operates in
between business partners. It is not mandatory to have an If the business offers personalized services or products. If the business
agreement however it is recommended. were to grow too large then, it would be harder to offer this personalized
service that is demanded by the customers.
Eg. Hairdressers, car repairs, convenience stores, catering.
Limited liability → When the liability of the shareholders in a ➔ The market size
business is limited to only the amount that they invested. If the market, the total number of consumers, is small then the business
They are legally only responsible to the debts of the company is likely to remain small.
Businesses that produce specialised goods or services which only
to an extent. appeal to a small number of consumers.
Eg. Luxurious cars, expensive fashion clothing.
Unlimited liability → When the owners and shareholders of ➔ Owner’s objectives
the business can be held responsible for the debts of the Some businesses prefer to remain small as the owners might want to
avoid the stress and worry of running a large business.
business and it is not limited to the investment that they made
in the business. Causes of business failure
➔ Lack of management skills
Incorporated business → A business that has a separate ➔ Changes in the business environment
➔ Liquidity problems/poor financial management
legal entity/status from the business owners.
➔ Over-expansion
Unincorporated business → A business that does not have Sole trader and partnership:
a separate legal status/entity to the business owners. Owner Advantages Disadvantages
Sole trader ➔ Little regulations to ➔ Unlimited liability
Shareholders → People that invest in a company by set up the business ➔ No one to discuss
purchasing shares which represent part ownership of the ➔ Complete control business matter
over the business with
company. ➔ Can keep all the ➔ Capital invested
profits comes from a
➔ Freedom to choose single person
Joint venture → A project in which two or more businesses own work hours and ➔ Unlikely to benefit
holidays from economies of
start. They share capital, risks and profits. ➔ Does not have to scale
give any information ➔ Unincorpor
about the business.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller luciadao. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £11.18. You're not tied to anything after your purchase.
