Borja Jimenez
BUSINESS (Y10-11) IGCSE REVISION
CHAPTER 1
BUSINESS ACTIVITY AND INFLUENCE ON BUSINESSES
Contents:
CHAPTER 1.............................................................................................................................. 1
BUSINESS OBJECTIVES (2)................................................................................................... 1
SOLE TRADERS, PARTNERSHIPS, SOCIAL ENTERPRISES AND FRANCHISES (3).....................3
LIMITED COMPANIES AND MULTINATIONALS (4)..................................................................5
PUBLIC CORPORATIONS (5).................................................................................................. 7
APPROPIATENESS OF DIFFERENT FORMS OF OWNERSHIP (6)..............................................8
CLASSIFICATION OF BUSINESSES (7)...................................................................................9
DECISIONS OF LOCATION (8).............................................................................................10
GLOBALIZATION (9)........................................................................................................... 12
THE IMPORTANCE AND GROWTH OF MULTINATIONAL COMPANIES (10)............................13
INTERNATIONAL TRADE AND EXCHANGE RATES (11)........................................................15
GOVERNMENT OBJECTIVES AND POLICIES (12)..................................................................16
EXTERNAL FACTORS (13)................................................................................................... 19
MEASURING SUCCESS IN BUSINESSES (14)........................................................................20
REASONS FOR BUSINESS FAILURE (15)..............................................................................22
BUSINESS OBJECTIVES (2)
Subsistence economy: a community that lives at the most basic level
Business: an
Specialization: concentration on one particular task or job that you are good at
organization set up to
produce goods and / enjoy doing
services for - the major benefits of specialization are that it saves time, people become
more skilled at what they do, and the quality of product will increase.
Wants: goods that you desire but could not previously have
Profit: Total revenue
Surplus: goods over your basic needs
– Total costs
Objectives: short- Businesses are more likely to succeed if they set clear objectives
term targets because; employees need something to work towards to (this increases
Aims: long-term motivation), and objectives help to decide where to guide a business and what
goals steps are necessary to get there. By setting objectives, the performance of
the business can also be assessed, and it ensure whole business coordination.
Producer good: Survival: for most businesses, especially small ones, survival might be the
goods or services most important objective
produced by one Profit: most businesses want to make a profit because owners want financial
business for another return. Profit is the difference between total revenue and total costs.
Consumer good: Sales: some owners want to grow in sales
goods and services Businesses with a large number of sales may: enjoy lower costs, have a
sold to ordinary larger market share (the portion of a market controlled by a particular
people rather than
company or product), enjoy a higher public profile and generate more profit
Patent: granted by the
government and confers
for the owner.
on the holder the right to
manufacture an invention
and excludes others from
doing so
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, Borja Jimenez
BUSINESS (Y10-11) IGCSE REVISION
Financial security: some businesses might aim to make enough profit to give
them financial security. (also known as profit satisficing). One way of
achieving financial security is by having the biggest market share, to minimize
threats. Another way of securing your business ideas is by using a patent.
Public sector: businesses
owned by the government
Private sector:
businesses owned by
individuals or groups Social objectives:
- In the public sector, social objectives are very important. These are
designed to improve human well-being. In the public sector most
objectives will be linked to quality, service and reducing costs.
Business objectives will continuously have to change. Mainly because of the following
reasons;
1. Market conditions: businesses operate in dynamic markets- markets change all the
Entrepren time, and businesses have to adapt to these changes (new rival…). When market
eur: conditions change, it may be necessary to set new objectives
person
2. Technology: as the pace of technology increases, businesses may have to adjust
who takes
risks and their objectives
sets up a 3. Performance: the performance of businesses are likely to vary constantly.
Performance levels may have an impact on objectives.
4. Legislation: new legislations (sets of laws) might have an impact on businesses.
5. Internal reasons and factors: changes inside the businesses itself (new owner) might
also cause changes in objectives
STAKEHOLDERS
- Any individual or group that have an interest in the operation of a
Shareholder: business. (ex. Owners, employees, shareholders, directors, customers,
an owner of mangers, suppliers, government…)
shares in a
company
PROFIT
- Profit serves as a reward for the business. It provides funds to the business
for daily function and future expansion.
- Some businesses aim for profit maximization- largest profit as possible,
however this may be hard because; stakeholders could get into conflicts,
and for small businesses it might be possible to increase the level of profit
however this would mean working for longer hours.
FACTORS OF PRODUCTION
- These include;
- Labor: finding and managing the workforce
- Capital: obtaining and maintaining the physical aspects off the firm;
buildings, equipment, vehicles
- Land: arranging and paying for where to locate this mixture of labor and
capital
SMART OBJECTIVES
- Specific: it must be clear state what it wants to achieve
- Measurable: it has to be measured against something. (achieve 20%
increase compare with last year)
- Achievable: it must be capable of achieving
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, Borja Jimenez
BUSINESS (Y10-11) IGCSE REVISION
- Realistic: it must be achievable in a range of resources the business has
available
- Time-bound: it must have a time period or deadline
SOLE TRADERS, PARTNERSHIPS, SOCIAL ENTERPRISES AND
FRANCHISES (3)
Employmen - People who set up a business are entrepreneurs. They are innovators and
t laws: laws they try to make money out of a business idea. They are responsible for
on organizing the factors of productions. Since they are the only owners, they
employees have to make all key decisions. Entrepreneurs are especially known as risk
employed;
minimum takers.
wages,
working - Unincorporated: these are businesses where there is no legal distinction
between the owner and the business. (unlimited liability)
- Incorporated: one that has a separated legal identity from that of its
owners. These are often called limited companies. (limited liability)
SOLE TRADERS
- ADVANTAGES of a sole trader - DISADVANTAGES of a sole trader
- The owner keeps all profits - Have unlimited liability
- PlanningTheypermissions:
are independent- they have complete control - May struggle to raise finance
local government
- authority
It may
is simple
needtotoset with no specific legal requirements - Complete independence ma become too much of a big
grant planning responsibility
- permissions
Flexibility- can adapt to changes quickly
to avoid - Long hours and very hard work
neighbors being
- Can offer a close personal service as they are usually small- - Usually too small to exploit economies of scale
sized businesses
- Privacy; unlike limited companies, sole traders are not -
required to publish their accounts
- A sole trader / sole proprietor is the simplest form of a business
organization; there is a single owner. Setting up a sole trader is simple
because there are no legal requirements
- A sole trader may employ workers to help them, but as a business owner,
he or she takes all risks and therefore will receive all profits.
- Sole traders usually serve a local community or concentrate on a limited
market.
- All sole traders have unlimited liability; this means they are totally
responsible for any debts they incur; they can lose all money originally
invested.
Difficulty and problems for sole traders
- Raising money can be difficult for small businesses, if the owner does not
have enough money to finance the venture and relatives are unwilling to
support they will probably go to the bank. Banks however, are often
reluctant to give money to someone who does not have a good business
record. Without experience, banks will be unhappy about lending money-
it is too much of a risk
- If a business depends on one business to manage it, and that person is
unable to come to work serious problems will rise; there might be no one
able to operate the business, the business might have to close down for a
period of time, business would get a bad reputation for poor reliability and
customers may get angry.
- A lack of size in the business may unable businesses to operate in
economies of scale.
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