Caie Igcse: Business STUDIES (0450)

ZNOTES.
ORG
UPDATED TO 2020-22 SYLLABUS
CAIE IGCSE
BUSINESS
STUDIES (0450)
SUMMARIZED NOTES ON THE SYLLABUS
CAIE IGCSE BUSINESS STUDIES (0450)
1.4. Added Value

1. Understanding business Added value is how much more a business sells a product
activity for than the
total cost of materials
Added Value = selling price – total cost

1.1. Nature of Business Activity It is NOT the profit because added value does not include
the price
to pay for labour, transport etc.
Needs: goods or services that we need in order to live To increase added value, a business can either:
Wants: goods or services which people would like to have. Increase the selling price of product, while keeping
But
are not essential for living.
the total
cost of material the same
People’s wants are unlimited (you will always want Decrease the total cost of materials, while keeping the
something)
selling
price of the product the same.
There are unlimited wants but there are limited resources
to
produce them 1.5. Classification of Businesses
Resources include: Land, Labour, Capital & Enterprise
This creates scarcity. Businesses can be put into three sectors:
Scarcity: there are not enough products to fulfil the wants In developing countries, the primary sector employs most
of
the population of
the work-force. This is because most people live in
Since there are limited resources, we have to make rural areas and
there is low demand for services
choices on what
we want. This means that we will be In more developed countries, the secondary and tertiary
giving something up, this is the
opportunity cost sector employ more workers
Opportunity cost: the thing we give up by choosing In economically developed countries, the tertiary (service)
another item.
The next best alternative. sector employs most people as they import
manufactured goods from
other countries (tourism)
1.2. Specialisation
1.6. Mixed Economy
Specialisation: when people and businesses focus on
what they
are best at. Has both a private sector and a public sector.
Using specialised machinery, work is more efficient
Being efficient keeps costs low, good for competition Stage What it does Example
A specialised worker has higher living standards Extracts and uses the
Division of labour is when production is split in different
Farming, mining,
Primary natural resources to
tasks
and each worker performs one of these tasks
forestry
produce raw materials
Takes the raw materials
Advantages Disadvantages Manufacturing (car,
Secondary and converts them into
Workers become bored of food, etc.)
Workers specialized in certain manufactured goods
doing the same job. Efficiency
task, increases efficiency Providing services to
might fall Retail shops, hotels,
Tertiary consumers and other
Less time is wasted from one If a worker is absent, no hospitals
sectors
workbench to another, more other worker can do the job.
efficiency Efficiency might fall Private Sector: Businesses NOT owned by government,
will make
own decisions on what and how to produce.
1.3. Purpose of Business Activity: Public Sector: Owned by the government. Government
will make
decisions on what and how to produce (i.e.
Businesses combine scarce factors of production to healthcare, education,
defence, public transport)
produce goods or
services to satisfy people’s wants
Factors of production: 1.7. Enterprise, Business Growth & Size
Land – all resources provided by nature (oil, metal)
Labour – the no. of people to make the products An entrepreneur is a person who organises, operates and
Capital – the finance and equipment (machinery) takes
risk to make the business better
needed to
make products Characteristics of entrepreneurs:
Enterprise – the skill of the person who brings other Hard working
factors of
production together to make goods Risk Takers
A business also employs people as worker and pays them Creative
wages to
allow them to consume products as well Effective Communicators
Optimistic
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Self-confident Measurements Limitations

Innovative
Some businesses employ few
Independent. The number of people
people but produce high
Advantages and disadvantages of being an entrepreneur: employed in the business
output values
Advantages Disadvantages The value of output of the high level of output does not
business mean business is big
entrepreneurs will have to
Independent, able to choose different businesses sell
put their own money into the
how to use time and money The value of sales different products (expensive
business.
and cheap)
Able to put own ideas into many entrepreneur’s
practice businesses fail (risky) The total value of capital some companies may use
(money) invested into the cheap labor giving low output
May become successful and Lack of knowledge and
business (capital employed) with low-cost equipment
very profitable if business experience in starting and
grows operating a business
Lost income from not being 1.11. Business Growth
Able to make use of personal
employee for another
interests and skills Some businesses want to grow because:
business (Opportunity cost)
Higher profits
More status for owners and managers
1.8. Business Plans can benefit from Economies of Scale (lower costs)
Larger share of its market, ‘big names'
A business plan contains business objectives, important
details
about the operations, finance, and the owners
Business plans assist entrepreneurs because: 1.12. Economies of Scale
It helps gain finance. banks will ask for a business plan
before
agreeing to a loan or overdraft for the Economies of scale are the factors that lead to a
business reduction in
average costs as a business grows.
It forces the entrepreneur to plan ahead carefully, Purchasing - when businesses buy in ‘bulk’ so they get
which
reduces risk of the business failing. cheaper
prices
The main parts of a business plan include: name, type of Marketing - targeting a larger audience, business
organization, business aim and forecast profit advertises its
own product rather than having another
company doing it
Financial - bigger businesses get better interest rates
1.9. Government Support for Start-Ups from
banks as they are less risk
Managerial: Big businesses can afford specialist
Governments encourage entrepreneurs to set up a managers
business because
start-ups: Technical - Big businesses can afford specialist machines
Reduce unemployment, new businesses create jobs to do
more efficient work with less staff
Increase competition, gives consumers more choice Businesses can either grow by:
Increase output, economy benefits from increased Internal Growth
output of
goods and services External Growth
Can grow further and become large and important Internal Growth is when the business expands its
existing
businesses which pay government more taxes operations
Governments may give support to entrepreneurs by: External Growth is when the business takes over or
Business ideas & help, they set up support sessions merges with
another business.
held by
experienced business people There are three types of External Growth:
Finance, they may lend loans at low interest rates or Horizontal Integration – firm taking over/merging with
grants if business starts up in places with high another
firm in the same industry
unemployment rates. i.e. a paper company taking over another paper
Governments provide grants for training employees company
to make
them more efficient and productive Vertical Integration – firm taking over/merging with
Governments allow entrepreneurs to use research another
firm in same industry but different stage of
facilities
in universities production (there is forwards and backwards)
i.e. paper manufacturing company taking over paper
1.10. Business Size selling
company
Conglomerate Merger - firm merging/taking over another
There are several different measurements of business firm in a
different industry. (also known as
size and they
all have limitations: ‘diversification’)
i.e. paper company taking over a food company
Measurements Limitations
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1.13. Problems with business growth 1.16. Partnerships

(Diseconomies of Scale) A business in which 2 to 20 people agree to own it.
Usually small
businesses but bigger than sole traders.
Diseconomies of scale are factors that lead to increase of
Useful for people who want to form a business but
average
costs as a business grows above a point.
don’t want the
legal complications
Poor communication - Bigger businesses are hard to send
Industries such as medicine or law where you are not
and
receive messages.
allowed to
form a company
Low Morale - Big businesses employ many people, some
Partners that know each other very well
workers
feel unimportant as they cannot grow in
Requires a Partnership Agreement
business, efficiency lowers.
Slow decision making - Bigger businesses take longer to Advantages Disadvantages
make
decisions to satisfy all of the audience
Easy to set up, do not require Capital is usually provided by
Some businesses stay small because:
a lot of money partners
Market size is small
Owner’s objectives More capital invested (more Partners have unlimited
Type of industry expansion) liability
Partners can disagree on
Partners are motivated
decisions. If one of the
1.14. Why Businesses Fail because any losses are
partners is inefficient, they all
shared by the partners
lose money
Poor management – from lack of experience, poor choice
of
managers (family business), bad decisions Responsibilities are shared They are unincorporated. If
Failure to plan for change – businesses need to adapt (focused on different parts of one of the partner dies, the
everchanging business environment. Must take risks. business) partnership ends
Poor money management – lack of money to pay
workers, suppliers,
landlords, etc. Contents of Partnership Agreement:
Over-expansion – (diseconomies of scale), management Amount of capital invested by all partners
problems and finance Tasks to be done by each partner
Competition with other businesses – new businesses are The way profits are shared out
at more
risk of failing than existing businesses. How long partnership will last
This is because start-ups have lack of money, resources, Arrangements for absence, retirement and how
poor
planning & don’t have much research partners could be
let known
1.15. Sole Trader 1.17. Private Limited Company (LTD)
A business owned by just one person. It’s the smallest An LTD is different from the other because it can sell
type of
business. Can employ other people however. shares
and it is an incorporated business.
Useful for people who are setting up new business Company must be owned by at least 2 shareholders
Do not need much capital to get business running A shareholder buys shares of an LTD company which
Will be dealing mainly with the public represent
part ownership of the company
Dividend is the amount of profit each shareholder
Advantages Disadvantages gets
Capital is usually provided by Shares are sold privately to friends and family
Easy to set up, do not require Has separate identity from owners, incorporated, so
owner, hard to get capital to
a lot of money to set up company accounts
are separate from the owners’
expand firm
Must have: Articles of Association and Memorandum of
They have unlimited liability
They are their own boss, has Association
(responsible for any debts of
the freedom to choose their Article of Association – must contain the
RULES in which
the business, bank can take
own holidays, work hours, the company will
be managed. Contains:
away possessions to pay
prices, who to employ Rules for shareholder meetings
back)
List of directors and their jobs
Close relationship with Business is likely to remain Voting rights of shareholders
customers small Details of how accounts are recorded
Does not have to share No one to discuss business Memorandum of Association – must contain important
profits matters with information
about the company:
They are unincorporated Company name, address
Does not have to give
(business has same identity What the business does
information about the
as the owner). So, business Number of shares to be sold
business
ends when owner dies
Advantages Disadvantages
WWW.ZNOTES.ORG
Advantages Disadvantages The franchisee is the individual to start up franchise

Shares can be sold to lots of In a franchise, the franchisor allows the franchisee to
Difficult to set up (legal trade under
its name and see its products for a fee
people. More capital to
formalities). The franchisee pays an original fee to franchisor and a
expand
percentage
of its profit for the privilege
Owners are able to keep
Shares are difficult transfer. Franchisor provides support, such as:
control of company as long
Requires other shareholders Advertising
as they don’t sell too many
to agree Legal advice
shares
Employee training
All shareholders have limited Financial advice
Accounts are less secret than
liability (bank can only take Franchise agreements last 5 – 20 years, if franchisee
other forms of business
amount of money invested) cancels the
agreement early there may be large fines
Company continues after a Company cannot offer it
shareholder dies shares to the public
1.21. Risk, Ownership & Limited Liability
Private Limited Companies are useful for family Risk - the uncertainty of profits or danger of loss, events
businesses or
businesses/partnerships where owners that
could cause business to fail
want to expand more (as you can
sell shares) Ownership – who owns the business (partnership =
partners, LTDs
and PLCs = the shareholders)
1.18. Public Limited Company (PLC) The people with risk are usually the owners
Liability – how much the shareholders of a company are
A PLC is similar to LTD only the shares can be sold to the liable
for the debts in the business
public. It is the biggest type of business. Limited Liability – liability of shareholders is limited to
Shareholders of PLCs may attend an Annual General the amount of money they invested (PLC & LTD)
Meeting where
they may vote for the board directors Unlimited liability – owners of business are held
responsible for all the debts of the business (not just
Advantages (in addition to those their
investment) (Sole trader & partnerships)
Disadvantages
in LTDs)
Difficult to set up (legal 1.22. Public Sector
Opportunity to raise high capital
formalities) & accounts
sums
are even more public The public sector includes every business owned by the
Danger of business being government.
No restriction of buying, selling or
taken over due to public Businesses in the public sector are public services, i.e.
transferring shares
shares education,
transport, hospitals, education and police
Selling shares to public is Usually these businesses have been nationalized (used to
expensive be
private sector but government bought it)
Capital comes from taxes, by tax payer
DON’T GET CONFUSED, Public Limited Companies are
NOT in the
PUBLIC sector, they are in PRIVATE sector 1.23. Business Objectives
1.19. Joint Venture Business objectives are aims or targets a business works
towards
A joint venture is when two or more businesses start a Business objectives give clear target to managers and
project
together sharing capital risks, and profits employees and
boosts the workers’ motivation
Private sector business objectives:
Advantages Disadvantages Business Survival - Adjust to business environment,
Costs are shared, good for Profits have to be shared if change
price of products if necessary
expensive projects project is successful Generating profit – pay a return to owners or provide
Shared knowledge of two Might have disagreements finance to invest further in business
businesses over important decisions Returns to shareholders - discourage shareholders
from
selling their shares. Can be increased by
Different methods of running
Risks are shared increasing profit or
increasing the share price
business
Growth of business – increase salaries, economies of
scale.
only achieved if customers are satisfied with the
1.20. Franchise product
Market Share – the proportion of the total market
A franchise is an agreement of a business based upon an sales by
one business, gives good publicity, more
existing
brand/business influence over
suppliers and customers
The franchisor is the main business/brand
WWW.ZNOTES.ORG
Service to community – provide jobs, support

disadvantaged
groups in society, protect environment
1.24. Stakeholder objectives

A stakeholder is any person with a direct interest in the Safe/security Needs – protection against danger &
performance of a business poverty.
Having fair treatment
There are two types of stakeholder groups: (fulfilled by having job security)
Internal Stakeholders work/own the company Social Needs – friendship, belonging in a group
(owners,
managers, workers) (fulfilled by having colleagues at work)
External Stakeholders are outside of the business Esteem Needs – having status and recognition
(consumers, government, banks) (fulfilled by being recognised for good work)
Each stakeholder group has different objectives for the Self-actualisation – achieving your full potential, feeling
performance
of the business that
you have done a good job
Internal Stakeholder’s objectives are payments or profits, (fulfilled by being promoted &
being given more
they
want business growth, so value of investment responsibility)
increases or they get
higher status/power Maslow’s theory also suggests that each level in the
Customers objectives are reliable products, value for hierarchy
(starting from Physiological needs) needs to be
money,
good quality, good design and good service achieved before
moving on to the next
Government objectives include: money from taxes, will F.W Taylor’s theory - “All individuals are motivated by
employ
more people, increase country’s output personal
gain”
Banks objectives are to make profit out of loans This means that if the workers are paid more, they will
Since different stakeholders have different objectives, it work more
effectively
may cause
conflict, to try to please all the stakeholders By breaking down worker’s jobs into simple tasks, you
For example: customers want cheap products but could
calculate how much output they could do in a day
workers want higher
salaries. Taylor’s theory focused mainly on factory workers, since it
Therefore, managers have to compromise to decide is easy
to work out their output done
which objectives
are best for the company Taylor’s idea was that if the workers produced this target
output,
they would be paid more money
This idea led to big productivity gains in companies that
2. People in business adopted
this theory
Herzberg’s theory – humans have two sets of needs:
2.1. Motivating Workers Basic animal needs (called
‘Hygiene’)
To be able to grow physiologically (called
‘Motivator’
It is very important for a business to have a well- needs)
motivated
workforce
‘Motivator’ Factors ‘Hygiene’ Factors
The main reasons why people work:
Money: to pay for the basic needs for life and some Achievement Status
wants
Security: to know that you are safe (financially) Recognition Security
Affiliation (Social needs): to feel part of a group, meet
Personal Work
people, make friends
Growth Conditions
Self-importance (esteem): to feel that you are
important and
that the job you do is important
Relationship
Job Satisfaction: to feel pleasure that you have done a Advancement/
with boss &
good
job Promotion
subordinates
Motivation – the feeling that makes employees want to
work hard
and effectively in a business
Work itself Salary
2.2. Key Motivational Theories

Herzberg’s theory claims that the ‘Hygiene’ factors must
‘Maslow’s Hierarchy of Needs’ – a pyramid showing the be
satisfied, if not, it will demotivate workers
different
types of needs and how some are more Only after they are satisfied, can the ‘Motivator’ factors
important than others can act
as motivators for employees
Physiological Needs – food, rest, shelter

(fulfilled by receiving wages) 2.3. Methods of Motivation

There are 2 Factors that motivate employees:
Financial Rewards
WWW.ZNOTES.ORG
Non-Financial Rewards
Financial Rewards/Motivators include:
Wages (payment for work, usually weekly)
Time Rate (payment per hour, i.e. 10$/hour)
Piece Rate (where workers are paid depending on the
quantity
of products made). Has also BONUS system
for employees who
produce more than the set target.
Salaries (payment for work, usually monthly)
Non-Financial Rewards/Motivators include:
Job Rotation
Job Enlargement
Job Enrichment You can have a ‘wide’ structure, with a short chain of
Job Satisfaction command:
Fringe benefits such as:
Company Car Chain of command – the structure in a business that
Discounts of products allows
instructions to be passed down from a person to
Health care another, below them
in the command.
Children’s school paid for Subordinate – someone who is lower in rank, under
House is paid for authority of a
superior (manager)
Free trips abroad (holidays) Span of control – how many subordinates work directly
under a
manager
Authority – someone that has recognised power to make
2.4. Organisation and Management decisions
and to delegate tasks
Delegation – the process of giving authority to a
Organisational structure – the levels of management and
subordinate to
perform a task (instructions)
division
of responsibilities within a company
The advantages to have a short (and wide) structure is
Organisational structures show the chain of command in
that:
a company
this is usually in the form of an Organisational Chart
Organisational Charts show a clear structure of the
business and
make it easy to see which part of the
company does what
Example of Organisational Chart:
Communication is faster and more accurate

Top managers are more in touch with subordinates
because there
are less levels
wider span of control means employees feel trusted and
take
more decisions by themselves
In organisational charts, it is usually arranged in

department
(finance, operations, etc)
Sometimes there is conflict between departments (i.e.
The benefits of an organisational chart are that it shows marketing
wants to buy something but finance does not
how
everybody is linked together in the organisation, think it is necessary)
they know who to
reach and how. The supervisors working in these departments are Line
Each employee can also see their own position, who’s managers –
they have direct responsibility over people
authority they
are under and who they have authority below them in the
organisational chart
over You also have Staff Managers – which are specialists in
It gives everyone a sense of belonging, motivates them to certain
areas to provide support and information to line
move up
the chain of command managers
There are two types of organisational structures of a
business:
You can have a ‘tall’ structure, with a long chain of
command:
WWW.ZNOTES.ORG
Laissez-Faire Leader: Where the manager makes

2.5. Role of Management broad/general
objectives for the employees and
leaves them to make their own
decisions.
All organisations have managers. Leaders, director,
executive are
all different names, but they are all
managers 2.7. Trade Unions
The functions of managers include:
Planning – setting aims or targets Trade union – a group of workers that join together to
Organising – delegating tasks. organising people and protect
their interests
resources effectively A trade union is a pressure group
Employees usually have the same interests (i.e. good
wages, pleasant
work environment, etc)
If an employee wants to join a trade union, they must pay
a yearly
subscription for the benefits
Benefits from a trade union usually include:
Improved conditions of employment (such as wages,
holidays,
hours of work)
Improved work environment (health & safety, heating,
noise)
Advice/support if member thinks they have been
unfairly
fired, mistreated, etc
Co-ordinating – making sure departments work well with
each
other and have good communication
Commanding – making sure the workers are keeping to 2.8. Recruitment
targets and
deadlines. By guiding and delegating tasks
Controlling – measuring and evaluating work of Recruitment – the process from identifying that a
employees and
verify they are on target business needs
to employ someone, to the point where
applications have arrived at
the business
Managers often delegate tasks to employees, giving them Recruitment is one of the roles of the Human Resources
authority to
complete that task. department
However, if the employee does a bad job, the manager Recruiting usually happens when an employee leaves a
must accept the
responsibility for it job, a business
is starting up, or it wants to expand
Delegation is important because: Recruitment process (for external recruitment):
Managers cannot do every job by themselves 1. A job analysis is done to identify the tasks and
managers can then measure the success of the responsibilities to be carried out by the new employee
employees 2. Once the details of the job are gathered, a job
work becomes more interesting for subordinate, description
increases their
motivation will be made, outlining these duties.
makes employees feel trusted and important 3. From the job description, a job specification is
However, some managers do not delegate tasks created,
They might be afraid the subordinates will fail and which outlines the requirements, qualifications and
manager wants to
control everything expertise for
the job
Manager might also feel threatened that subordinate will 4. Then the job is advertised in the appropriate
do a better
job than them media (i.e. if
Delegation means that once the task is completed, the it is a finance related job, it might be advertised in finance
manager will
have less direct control magazine)
This means the trust for the workers is increased by the 5. Candidates start sending their application forms
manager and the company
Therefore, there needs to be more trust in workers in does a short-list for interviews (because they cannot
order to
reduce control over them interview all)
6. The candidate is chosen after the interviews by
2.6. Leadership Styles the company, job
is filled
Leadership styles are the different approaches to deal
There are two types of recruitment:
with people
when with authority
External Recruitment – job is filled by someone who is
There are THREE TYPES OF leadership styles:
not
an existing employee
Autocratic Leader: where the manager expects to be
Internal Recruitment – job is filled by an existing
in charge
of the business and expects to have their
employee
of the company.
orders followed with
no questions asked
Internal recruitment is good because it saves money for
Democratic Leader: where the manager allows the
business.
The person already has knowledge about the
subordinates
to be involved in the decision-making
business & position and
it motivates other workers to get
process
WWW.ZNOTES.ORG
a promotion. 1. Off-the-job training – where the employee is trained

however, it doesn’t bring in new ideas & experience. away from the workplace, normally by specialized
There are also two types of employment: trainers.
Part-time employment
Full-time employment Advantages Disadvantages
Part time employment is normally between 1 and 35 Expensive to send employees
Lots of skills are taught
hours a week off to expert trainings
Advantages: trainings are sometimes off-
Work hours are flexible. Fits with employees that have Workers are being paid but
work hours, worker will still
kids to
take care of not doing any work
work
Business can extend the opening/closing hours
Professional training gives
Employees can just work at busy times Employees become versatile
employees additional
Cheaper for the employer than employing a full-time (can be moved around
qualifications, makes it easier
worker company and know what to
for employee to find another
Disadvantages: do)
job
Employees are less likely to be trained because they
might see
it as temporary and don’t want a promotion
Sometimes, a company might need to reduce the size of
Takes longer to recruit many part-time workers than a
the
workforce, possibly because of:
couple
full-time workers
Automation (robots replacing human jobs)
Might be less committed to the company
Less demand for products or services
Business might have relocated abroad
2.9. Training Business being taken over/merged and now there are
too
many workers doing same job
Training is important for a business because: Companies need to think ahead on the future and
It helps employees become more comfortable with establish how many
employees they will need and their
new processes
or equipment skills, this is called
workforce planning
Improves the efficiency of the workers When a business needs to reduce the number of
Makes employees more valuable to the company employees, they can
either dismiss the employee or
because they
become more skilled make them redundant
Reduces the amount of supervision needed by the Dismissal – when the worker is told to leave the job due
workers to poor work or poor behavior (i.e. if employee is always
Reduces the amount of accidents late for work after being given warnings, when employee
There are three types of training: is caught stealing, etc)It is more commonly known as
Induction Training – where the employee is given an being ‘fired’
introduction on the company’s procedures and customs, Redundancy – when a business no longer needs an
and is introduced to their co-workers employee. Even though the employee did nothing wrong.
Usually happens during period of falling sales or due to
Advantages Disadvantages an economic recession (when no one is buying anything)
Employees settle into their
Time consuming
job quickly
2.10. Legal Controls over employment
Workers make fewer Worker is being paid while
mistakes not doing work issues
Delays the start of work for
May be a legal requirement There are many laws in countries, that ensure that
the employee
everyone has
equal employment opportunities regardless
of race, gender, religion,
age etc.
1. On-the-job Training – where the employee does the
This means that businesses need to be careful when
job while
being supervised by a more experienced
advertising a
job. They cannot advertise for just a single
worker, giving tips,
suggestions and help
type of person.
Advantages Disadvantages Companies must treat all applicants for the job equally, if
not,
they will be fined and prosecuted
Trainer won’t be as
Employee does not need to Employees of a business have legal right that must be
productive because they are
be sent away protected,
which includes:
teaching employee
Unfair discrimination at work/when applying: i.e.
Trainer might have bad when
employers discriminate unfairly against
So cheaper than off-the-job
habits and pass on to employees or applicants
due to their race, gender,
training
employee religion or colour.
Not recognized training Health and safety: there are laws that make sure that
There is still production from
qualifications outside the employees are protected from dangerous machinery,
worker while training
business that they are
provided safety equipment & clothing,
WWW.ZNOTES.ORG
hygiene conditions,
suitable temperatures, provide Advantages Disadvantages
breaks. Not good for accurate
Unfair dismissal: when the worker is dismissed Opportunity for immediate messages and if a permanent
unfairly
(i.e. from joining a trade union, being feedback record of the message is
pregnant, or when given
no warnings before being needed
dismissed), the worker can take their
case to an
Message is reinforced by the
industrial tribunal to see both sides of
argument.
speaker’s body language
Wage protection: an employee in a business should
have a
contract of employment, where it should
contain the wage
rate, frequency of wages and what Written methods – sender creates e-mails, memos or
deductions are made from the
wages (from tax). In letters,
including the use of Information Technology
some countries businesses pay whatever they
want
because unemployment is high, so they offer very low
wages. Might lead to too many e-
Message can be referred to in
Governments take action by creating a legal minimum mails and ‘information
the future “hard evidence”
wage. overload’
Easy to explain complicated Two-way communication is
messages difficult
2.11. Internal & External Communication
Can be copied and re-sent to Hard to check if message has
Effective communication is important so that the many people been received
information sent in
the message is received, understood
and acted upon as it should Visual methods – sender uses diagrams, charts, videos,
It is important to businesses because if it is not PowerPoints
understood, it
can lead to serious consequences
There are two types of communication in businesses: Advantages Disadvantages
Internal Communication – communication between Information presented in
No feedback and needs other
employees of the
same business more appealing way, people
methods of communication
External Communication – communication between the will be more interested to
to go with it
business and
other businesses and individuals look at it
External communication has to be especially efficient Graphs and charts may be
Can be used to make written
because it
establishes the image and the efficiency of a difficult for people to
messages clearer, to illustrate
business understand, message may be
the point
i.e. if a company communicates inefficiently with their misunderstood
suppliers,
they might receive the incorrect materials
Effective communication involves:
1. The transmitter/sender sending a message to pass
2.12. Communication Barriers
on
information
2. A medium of communication – the method for Communication Barriers – things that prevent efficient
sending message
(i.e. e-mail, phone, etc) communication
3. The message being sent to the receiver Problems with the sender:
when language is too difficult,
4. The receiver confirming that the message has speaks too quickly/not clearly,
communicates wrong
been received and
responds to it (feedback) message
There are two types of communication: Overcome by: using understandable language, making
One-way communication – where the receiver cannot sure message
is a clear as possible by asking questions to
reply to
the message (i.e. posters) make sure message was
understood
Two-way communication – where the receiver can Problems with the medium:
message may be lost/not
respond to
the message, could be just confirmation seen by receiver, wrong medium used (i.e.
important
that message was
received (e-mail) message on noticeboard), if message is being passed
along
– it might get distorted
The methods of communication include:
Verbal methods – sender speaks to the receiver (i.e. Overcome by: sender asking for feedback/receiver always
meetings,
telephone, video conference) sending
feedback that message is received, selecting the
appropriate channel
to send message
Advantages Disadvantages Problems with the receiver: not
listening/paying
attention, receiver doesn’t trust the
sender/doesn’t want
Information given out quickly
If talking to many people, it’s to do it
& Efficient way to
hard to tell whether everyone Overcome by: emphasizing importance of message, ask
communicate with many
got the message for feedback
to ensure it was understood, using direct
people
communication
3. Marketing
WWW.ZNOTES.ORG
Market – the total number of customers, potential

3.1. Marketing, Competition & Customer
customers
and other sellers of a product/service
There are two types of market:
Marketing – Identifying customer needs and satisfying
Mass market – where there is a very large number of
them
sales of
a product type
There are many departments within the Marketing sector
of a business Advantages Disadvantages
The role of the marketing is to:
Sales are very high Lots of competition
Identify customer needs – this will be done via ‘Market
Research’. It will influence the development of a Can benefit from economies
High costs of advertisement
product, its
price, and the sales technique of scale
A good marketing department should also be able Many similar products so it
Opportunities for growth
to
anticipate (predict before happening) changes may not meet specific needs
(large sales)
of customer
needs (i.e. due to advancement in of all customers
technology) There are many variations of
Find new trends or gaps in market with potential products so risk is spread
Satisfy customer needs – selling the exact product
customers
want, for a price they are willing to pay Niche market – a SMALL (usually specialized) segment
Maintaining customer loyalty – building customer (part) of a
mass market
relationships and make sure that existing customers
will
continue to buy from them and to attract new Advantages Disadvantages
customers Avoid competition with big Small – limited number of
Maintaining customer loyalty will be achieved by businesses sales
always
satisfying customer needs
Specific needs of customers Usually specialize in just one
Markets don’t stay the same forever, businesses need to
are focused. Advantage over product, if product has low
adapt to
market changes in order to stay competitive
mass market demand, it will fail
Some markets change very often (i.e. phones) while some
don’t change
quickly (i.e. jewelry or cereals)
Markets change because consumer spending patterns For example, the tie industry is a mass market, but a
change,
this might be due to: business that
makes ties out of crocodile skin is a niche
market
Trends and fashions change – for a period of time it
might
be fashionable to have a specific product (i.e.
Fidget Spinner)
but a month later no one buys them 3.3. Market Segmentation
Advancement in technology – new products provide
the latest
technology so older versions (i.e. iPads or Market segments – a sub-group of a market in which the
computers) don’t
have high sales consumers have similar characteristics or preferences
Unemployment/Wages – Economies with high A market can be segmented by:
unemployment
rates/low wages will not have high According to age
sales of expensive products Socio-Economic group – grouping people according to
Ageing population – different ages are interested in how much
they are paid
different products (i.e. anti-ageing creams) Location – where people live (people that live in wet
Changing customer needs are important to businesses. areas
will buy more waterproof clothing than those
They must
identify these changes and respond in order to who live in dry
areas)
stay successful Gender – men and women products differ
Market Share – the percentage of the total sales of a Lifestyle – how many children a person has, religion,
market held by a single business (i.e. if Company A has 50 habits, etc.
Million dollars in sales out of a 200 Million dollar market, Benefits of market segmentation:
then Company A has (50/200 =) 25% market share Business aims all of its marketing efforts to the
Some markets have become more competitive because: specific
segment, making marketing costs efficient
Globalization – products are sold all over the world Since less money is spent on marketing, more profit
Transportation – it is cheaper, quicker and easier to Identify a market segment whose needs are not being
send
products around the world now fully met
and fill the gap (first in market)
Internet – customers can now search for products or
services
and buy from somewhere else around world
3.4. Market Research
For a business to stay competitive, it must:
Maintain good customer relationships
There are 2 types of businesses:
Keep improving its existing products
Product-oriented business – a business that focuses
Bring out new products to keep customer’s interest
mainly
on the product itself
Keep costs low
Market-oriented business – a business that focuses on
market research and find out what the customer
3.2. Market wants BEFORE
a product is developed
WWW.ZNOTES.ORG
Market research is important because a business needs Benefits Limitations

to know how
many people would be willing to buy the Might not have the specific
product, this is to see how
profitable it would be information
Market Research – gathering information about
consumers' needs
or preferences in a market
Regardless on which type of research a business chooses
There are 2 main types of market research:
to use, the
accuracy of the research data depends on:
PRIMARY RESEARCH (field research)
How carefully the sample was drawn up
SECONDARY RESEARCH (desk research)
How the questions in questionnaires/interviews were
Primary Research - Gathering of ORIGINAL data by talking written
to make sure honest answers were given
directly with customers/potential customers The sample itself and its size. By using quota
sampling
Primary research includes: you might get more reliable results
Questionnaires/surveys The bias – some secondary research will be biased
Interviews – person will interview other person and (i.e.
articles on newspapers) which means the
ask
questions information might be
unreliable
Samples – A group of people who are selected Age of the data – older data might be inaccurate
(randomly) to
answer (i.e. questionnaire)
Quota Sample – when people are selected based on 3.5. Marketing Mix
certain characteristics (age, income)
Focus Groups – a group of people who represent the Marketing Mix – all of the activities that are involved when
target
market. They test out product/service and marketing a product or service
explain what they like
or don’t like about it The marketing mix can be summed up as the 4 Ps:
Observations – many methods, i.e. Seeing which Product
television
channels are being watched or watching Price
people and their habits
or seeing which products have Place
sold well in a store Promotion
You should always mention the 4 Ps when answering
Benefits Limitations question about
Marketing Mix!
If questions in questionnaires
Detailed information can be
aren’t thought out answers
gathered about the product
won’t be useful to the
3.6. Product
(can even be carried online
business
The product itself is part of the marketing mix, it has to
Customer/potential ensure it
is the right product for the market.
Can take lots of time and
customer’s opinions can be
therefore, expensive
gathered, and it is detailed
Most of these ways are Interviewer may lead the
inexpensive and gather lots interviewee to answer in a This includes the quality and the design of the product
of useful data certain way (inaccurate) (including
its packaging)
Marketers must ask themselves “what can I do to make
Secondary Research – information that has already been this product
better than my competitors’ products”
collected
and is available for others Unique Selling Point (USP) – the special feature of a
This information can be obtained either from INTERNAL product that makes it different from other products
SOURCES or EXTERNAL SOURCES. When businesses are developing new products there are
Internal Sources – within the firm’s own records: sales several
benefits, but also many costs/implications:
departments, customer records, finance department and
Benefits Costs
CUSTOMER
SERVICE department
External Sources – outside the business: government Since the product has its USP,
Carrying out new market
statistics
(i.e. population, ages), Newspapers, Market the business will be the first
research & analysis is
research agencies,
INTERNET into the market with the new
expensive
product
Benefits Limitations Diversification for the
You do not get specific business – more range of Producing prototypes & cost
Cheaper than primary as products to sell, more of wasted materials
results for a certain product
research has already been customers
or service, you get broad
done by others
results Allows business to expand Lack of sales if the target
There is some information into new (or existing) markets market is wrong
Data may be outdated or
(i.e. economic forecasts or Deterioration of brand image
incorrect as it was collected
population size) that can’t be if the new product fails to
by others
obtained by primary research meet consumer needs.
WWW.ZNOTES.ORG
Now-a-days products are sent straight to a retail store. Promotional – priced very low for a short period of
There is no
seller to persuade the potential customer to time to
increase sales. when there is lots of stock but
buy the brand’s product
over competitors no one is
buying. don’t make much (if any) profit
This has to be done through brand image of the product
Brand image – the identity of a product which separates it Method Benefits Limitations
from competitor products You could lose sales if
The product brand is advertised to inform all the qualities It is easy to create and price is too high
Cost Plus
about
the product and encourage consumers apply compared to
Businesses want to encourage existing and new/potential competitors
customers to
buy from them and create Brand Loyalty You have to do
If a business has a bad brand image due to poor quality Lots of sales because research to see what
or bad
service, then consumers will not buy from them the price is reasonable, competitors’ prices are,
and there won’t be
brand loyalty. Competitive
Product is not under- Time & Money, Prices
The other very important aspect of the product is the or over-priced are low so not much
packaging.
It has 2 functions: profit
To be easy to put the product in, protect it, allow it to
Sales are guaranteed, Product is sold at low
be
used easily, and to be easily transported from
Penetration and the new product price, so profit will be
factory
enters a market low
To promote the product: it must appeal to the
customer (colour &
shape) and must emphasize the
Establishes product as Price is so high that
Price
brand image (i.e. a luxury
product’s packaging might
good quality, Make may put off potential
Skimming
be gold colour) quite a lot of profit customers off
Product Life-Cycle – the stages a product will go through Gets rid of unwanted
There will not be
all
the way from development until decline (stop selling) stock that won’t sell,
much/if any profit
1. Development of product – market research Promotional renews consumer’s
made – because sales
carried out and product interest in business if
revenue is lower
is tested, before launching (no sales) sales are falling
2. Product introduced to market – Sales growing
slowly because Price Elasticity – a measurement of how responsive the
customers don’t know it exists yet (no profit) market is
when there is a change in price of a product
3. Growth - Sales grow quickly – advertising is In other words, how much you can increase the price
changed to before sales
fall enough that you make less money
encourage customer loyalty A product either has price-elastic demand or price
4. Maturity - Sales still increase, but slowly, inelastic demand.
competition is high Price-Elastic Demand is when the % of the loss in demand
so prices are changed (profits are at highest) is
GREATER than the % of the increase in price
5. Saturation – competition is very high, profits start i.e. prices increase by 5% but then sales decrease by 10%.
to fall as Therefore, there is falling revenue for the business
sales reached maximum point. Price reduced Price-Inelastic Demand is when the % of the loss in
6. Sales decline – new products are made or trend is demand is
LESS than the % of the change in price
gone. Prices This means you can increase the price of the product a lot
are so low it is unprofitable to make it. Advertisement is without
the demand changing (i.e. oil & petrol because
stopped people have to buy
it)
As you can see different stages can influence marketing

decisions
(i.e. pricing & promotion)
3.8. Place – Distribution Channels
Where a product is sold will affect how well it will sell
3.7. Pricing Distribution Channel - the method a business will use to
send a
product from the factory to customer/retailer
There are 5 main types of pricing methods:
Cost Plus – the cost of manufacturing plus a profit. There are 4 main distribution channels:

it will cover costs and make sure profit will be made

Competitive – priced just below the competitors’ 1. Manufacturer sells products directly to consumer (i.e.
prices to
get more market share and increase sales car
components to car factory)
Penetration – priced lower than competitors’ prices to
enter new market (consumers will try out cheaper
product and
see if they like it) Advantages Disadvantages
Price Skimming – a high price is set for a new product
Impractical because
on
the market. (used for new inventions or
Very simple consumers don’t usually live
development of an old
product) high profits to cover
near factories
the research
WWW.ZNOTES.ORG
Advantages Disadvantages There are many types of promotion methods a business

Not good for products that may choose to
use.
Suitable for products that are There are 2 types of advertisements:
can’t be sent easily by post
sold straight out of factories Informative Advertisement – where the promotion of
(may be expensive to ship it)
a product
focuses on giving information about a
There is a lower price for
product (i.e. the benefits
of the product)
consumer (cuts retailer)
Persuasive Advertisement – where the promotion of a
product
focuses on persuading the consumer that
1. Producer sells to retailers which sell to consumers: they really need the
product and they should buy it
(i.e. farms selling food to big supermarkets) A business must also choose the most suitable
advertising media to
use to promote a product/brand
Advertising media include:

Television – suitable for products sold to most people
(food, cars, household products). it is very expensive
There is no direct contact but
millions of people will see it
Manufacturer sells lots of with customers which makes Radio – cheaper than TV but there’s no visual message
stock to retailer It hard to create customer Newspapers – suitable for local products. Cheap to
loyalty advertise
and can be select to target specific group
Cheaper transportation costs Magazines – niche/specialist products can be
because all products go to promoted in
specific magazines (bike magazines,
one place technology)
Billboards – suitable for mass products/local events.
1. Producers sell to wholesalers – which buy in bulk and Reasonably cheap and are seen by many people. But
then
divide their stock into smaller quantities and sell many people
miss it. And no detailed info can be put
them to
retailers Internet (social media) – suitable for products people
already know (clothes, books, electronics). Quite
cheap and
through algorithms, websites can direct
ads to a target
audience, and orders can be made
Advantages Disadvantages online. However, there is lots
of competition (i.e. top
Reduces storage costs for More expensive to buy from on google)
small retailers because small wholesaler than from
quantities are sold manufacturer Another way a business can promote a product/brand is
Small quantities so transport Wholesaler might not have all through
Sales Promotions – when incentives (i.e. special
costs are low the products a retailer wants offers/sales)
are used to increase sales (short term)
The main sales production methods include:
Wholesaler can give feedback
Takes longer to get to Sales (price reductions)
on what sells well to
consumer Gifts (i.e. little toys in cereals)
producer
“Buy one get one free”
Competitions (I.e. raffles, a chance to win something)
1. A manufacturer hires an agent (person or business)
Free samples
that will sell
products on behalf or manufacturer
When a marketing department of a business is deciding
which type of
promotion it should use, it must take into
account the marketing
budget – the financial plan for
Advantages Disadvantages marketing product/brand for a period
of time
Agents know the most i.e. if the budget is small, a business cannot afford to
Manufacturer loses lots of advertise
on television
profitable places & prices to
control on the way the It must plan out perfectly in order to have cost
sell in other markets that
product is sold to customers effectiveness,
while reaching target audience
manufacturers may not know
This is where small business struggle compared to big
businesses,
because their budget is so much smaller.
3.9. Promotion
3.10. Technology & Marketing Mix
Promotion – publicizing a product/brand to increase
customer
awareness or increase sales
Now-a-days most things are sold on the internet, when
The aims of promotion include:
you buy or
sell goods/services on the internet it is calledE-
To create a brand image for a product
Commerce
To introduce a new product into a market
Not every product/service is suitable for e-commerce,
To increase competition in a market
products that
are handmade (i.e. suits) or businesses that
To improve the company’s image
like a personal
approach with customers
To increase the sales of a product
WWW.ZNOTES.ORG
The opportunities and threats of e-commerce to a

3.12. Legal Controls in Marketing
BUSINESS
includes:
There are many laws in different countries to protect
Opportunities Threats
consumers from
businesses taking advantage of their
Low-cost promotion: Competition is very high
lack of knowledge or lack
product information
websites are cheap to run because competitors also
These legal controls include (in the U.K.):
and can promote world-wide have websites to sell
Businesses are not allowed to sell products that weigh
Everything can be automated Website design must be easy less
than they should, or if weighing equipment is
(orders are received and sent to use and attractive, this inaccurate
to warehouse to dispatch) costs money ‘Trade Descriptions’ - Businesses are not allowed to
Businesses can buy from Transport costs per product give
consumers misleading information on purpose
other businesses sold are higher than sending (i.e. saying
that a shirt is made out of silk when it is
(materials/supplies) all to retailer made out of cotton)
No direct contact with ‘Sale of Goods’ - Businesses are not allowed to sell
customers – less feedback products that have less-than-satisfactory quality – that
don’t
fit for the purpose intended (i.e. waterproof
Opportunities & threats of e-commerce to consumers: shoes that aren’t
waterproof)
A service must be provided with at-least satisfactory
Opportunities Threats skill
and care
Don’t need to leave house to Need access to internet Businesses cannot have misleading pricing claims (i.e.
buy products, shipped (poorer countries don’t have 50%
off today, when yesterday it was the same price)
straight home good access to web) A business is responsible for any damage/harm that a
faulty
(or dangerous) product might do to a consumer
Easy to compare different Slow servers or websites or
Customers have 7 days in which they can change their
prices from different stores computer failures can
minds
about purchasing a good or service. This
and buy cheapest frustrate customers
applies to any
transaction made over distance (i.e.
Products cannot be online)
Payment is very easy through seen/touched/tried on (i.e.
credit/debit card shoes) and returning
products is inconvenient 3.13. Entering New Markets Abroad
Some people are worried
Can view and buy products The globalization of businesses has been increasing over
about identity theft or credit
from abroad, would be the years,
there are opportunities & problems to this:
card fraud by entering their
impossible without
details onto a website
Opportunities Problems
Competition of e-commerce
Growth potential in other
makes prices much cheaper Lack of knowledge of
countries: countries are
for consumers competitors or consumer
developing and population
habits
incomes are increasing
3.11. Marketing Strategy Markets in original country Cultural differences: for
might be saturated (sales are example, alcohol won’t sell
Marketing Strategy is the plan of action to promote and low) well in middle east
sell a
product or service Exchange rates: in some
This includes combining the 4 elements of the marketing Can produce products in
countries their currency isn’t
mix
(Product, Place, Price, Promotion) to achieve a abroad and learn about its
stable so price of importing
marketing objective,
which could include: market to increase sales
goods increase
Increasing the sales:
Trade barriers are lowered in
Of existing products (i.e. by selling in new market) Transport costs are more
most countries so it is
Of a new product expensive
cheaper to enter markets
Increase market share/maintain market share
The different elements of the marketing mix are very
However, there are many methods to reduce and
important to
influence customer decisions.
overcome the problems
of entering a new market:
For example: A product is made, priced reasonably, and
meets the
consumer needs, but there is no promotional
Problem Method to overcome
element. No one will buy
it because people don’t know
about its existence
Or if a product is made that doesn’t meet consumer
needs, so it
won’t sell regardless of the price set
It is crucial to have all elements working together in order
to
influence consumer decisions (buying the product)
WWW.ZNOTES.ORG
Problem Method to overcome Efficiency is increased by either:

Joint-Ventures: by working Using fewer input to produce the same output
Using the same inputs to produce higher output
together/merging with local
businesses in the same How to increase productivity/efficiency:
market, a business will gain a Improving the layout of machines to reduce wasted
time moving
from one workspace to another
lot of important knowledge
Lack of knowledge (& Cultural Improving the labour skills of workers so they use
about the culture &
Differences) more
productive techniques (more efficient)
marketFranchising: letting
improving employee motivation
people from the market
abroad which have local Introducing new technology (i.e. automation)
Improved quality control (check if product is not
knowledge to choose location
of shop faulty) to
reduce wasted time checking
Benefits of increasing efficiency:
Licensing: the business gives
More output compared to inputs
permission for a local
Lower costs per unit (AKA Average cost)
Transport costs are business to sell goods under
If there is more output, maybe less workers needed,
expensive its name, so they do not have
less
people to pay wages
to physically import all the
If there are less people working, raising their wages
products
will
increase motivation and so productivity
Localizing Existing Brands: Businesses hold inventories/Stock to ensure that there
where a business still has the are always
enough products to satisfy demand of
same brand image but customers
Cultural Differences
adapts it to the market it is in If a business doesn’t have enough stock of a product it
(i.e. McDonalds cooking might lead
to lower sales
vegetarian meals in India) When the inventories get to the ‘reorder point’, they will
be
reordered to get stock back up to maximum point.
Types of waste that occur in production:
4. Operations management Overproduction → leads to high storage costs and
possible
damage to goods while in storage
4.1. Production of Goods and Services When nothing is happening to the goods (not being
processed or
moving) this is Waste
Transportation – when the goods are being moved
Production – the making of a product or service to satisfy
unnecessarily → fuel price, may get damaged
consumer wants and needs
Motion – any action made by an employee that does
A business combines the inputs/economic
not
relate with the production of goods wastes time
resources/factors of
production to produce a more
Over-processing – when sophisticated machines are
valuable output (this could be a good
or a service)
being
used to do simple tasks
The ‘inputs’ include:
Defects – when goods have faults/defects that require
Land – For factories or for materials
them
being inspected/fixed wastes time
Labour – Employees
Lean Production – the techniques used by businesses to
Capital – Money/finance
reduce
waste, therefore increasing efficiency.
Enterprise – Managers
3 Types of Lean Production:
Businesses want to combine all of these inputs efficiently
Kaizen
to keep
costs low to increase profits
Just-In-Time inventory (JIT)
Labour-Intensive Production – where lots of workers are
Cell Production
used
rather than machines to make goods. Usually done
Kaizen – Japanese Term. Means “continuous
in countries with
low wages so that it is more efficient.
improvement” by
focusing on constantly reducing waste
Capital-Intensive Production – where businesses use
The Kaizen technique involves workers meeting regularly
machines/robots rather than workers. Usually done in
to discuss
problems and to find solutions
developed
countries where the wages are high.
Just-In-Time – a production method that virtually
Productivity – the output (goods) measured against the
eliminated the
need of having inventories of raw
inputs
(resources) to create it
materials for production and of
finished products
Productivity = Quantity of Output / Quantity of Inputs
JIT method involves an efficient system to time specifically
The difference between Production and Productivity is
when
the raw materials should arrive at a factory, for
that
Production is the process of creating the
production, and
when a truck should arrive to carry the
product/service from inputs. And the Productivity
finished products to the
next stage of production. (used
measures the
efficiency of the Production
by Volkswagen)
Businesses usually measure the productivity by
Just-in-time system reduces costs by not holding any
measuring one of the
factors of production against the
inventory.
Because components and materials arrive just-
outputs (usually Labour)
in-time when needed.
Labour Productivity = Output / No. of employees
WWW.ZNOTES.ORG
Cell Production – where production is divided into Shipping cost: Making more products means you have
separate
units (cells) each making a part of the finished to ship
more items and shipping is paid by weight
product. Rather
than having a flow or mass production. Total Cost – Fixed and variable costs combined
Cell Production improves employee morale so they work Average Cost (Per Unit) – total cost of production divided
harder and
more efficient. by
the total output. Referred to as Unit Cost
Large businesses can benefit from Economies of scale
and therefore
getting lower average costs.
4.2. Methods of Production
3 main methods of production: 4.4. Break-Even Charts
Job Production – products made one at a time
Batch Production – a quantity (batch) of a product is Break even charts show how costs and revenues of a
made, then a batch of another product is made business change
with sales. They show the level of sales
Flow Production (mass) –large quantity of products the business must make in
order to break even
made in
a continuous process The break-even point is where:
Job Production: Total Cost = Sales Revenue
Where the revenue line intersects the total cost
Features Benefits Limitations Sales revenue is the income of a business from sales of
good for “one-off” Often labor goods or
services in a period of time.
products intensive, + cost To draw a break-even chart, you must include:
Products are made
meets exact Production takes Fixed Costs line
specifically to order
requirements of longer Variable Costs line
Each order is
customer Any errors are Total Costs line
different
varied work expensive to fix, Sales Revenue line
i.e. bridges, ships,
increases (made to order) Anything before the break-even (BE) point is loss
cinema films, suits
employee Materials are more Anything after the break-even (BE) point is profit
motivation expensive ‘y’ axis measures money amounts (cost & revenue)
‘x’ axis shows the number of units produced or sold
Computer Aided Design (CAD) – software that helps Total cost is variable cost line starting from fixed cost
design or
re-style products quickly, allows technical If the total cost increases, then the BE point increases and
sketches to be very
detailed total cost’s line becomes steeper
Computer Aided Manufacture (CAM) – when computers If revenue increases, then revenue line becomes steeper
monitor
production and control machines/robots and so
the break-even point decreases
Computer Integrated Manufacturing (CIM) – wen software Benefits of break-even charts:
that
designs the products is integrated with the machines
that produce
(CAM + CAD)
4.3. Costs and Scale of Production

Managers can read of the graph if the company
Fixed (overhead) Costs – Costs that do not change with expects profit
or loss, and can see how much
the
number of items sold/produced. profit/loss the will have at
any level of output
Fixed costs must be paid regardless if the business is They can attempt different scenarios and see the
making a
profit or not. impact it
will have on the profit or loss of the
Examples of Fixed Costs: business. It lets
managers try out different
Rent of factory: even if you produce lots of products, possibilities to find out which
one is the best. (i.e.
the
rent price will be the same increasing the selling price,
increasing production)
Insurance: you set the insurance cost before-hand It can be used to show the SAFETY MARGIN – the
Bank fees: bank fees are a set price, they don’t change amount by
which sales exceed the break-even point.
depending on the products produced For example: if a business’ break-even point is at 400
Management Salaries: they are set regardless of units

and they’re producing 600 units, their safety
production margin is 600 –
400 = 200.
Staff cost (Security) Limitations of break-even charts:
Variable Costs – costs that are directly proportional with Break-even charts assume that all products made will
the
number of items sold/produced. be
sold. It does not show the possibility that
The more items produced, the higher the variable cost inventories may
build up if they are not sold
Examples of Variable Cost: Fixed costs only stay the same if the scale of
Raw materials: the more you produce, the more production
stays the same (doubling the output will
materials
you need also increase the
fixed cost because they must need
Electricity & Gas: Energy is paid by use. if you are bigger factory, more
machinery, labour, etc)
producing more, more electricity is being used Break even charts assume that costs and revenues
can be
drawn with straight lines, which doesn’t
WWW.ZNOTES.ORG
happen in real
life. Relies on employees following instructions of the
To calculate the break-even point: standards
set by company
Break Even = Fixed cost / contribution (per unit) Total Quality Management (TQM) – the
continuous
Contribution – the selling price of a product (unit cost) improvement of
products and processes by focusing on
subtracted by the variable cost (per
unit): quality at each stage of
production
Many companies use Total quality management.
Contribution = unit cost – variable cost (per unit) It tries to “get it right the first time” and have no defects
Variable cost (per unit) = Variable cost / units produced It focuses on ensuring 100% that the customer is always
satisfied. Customer is not just the final user, it also
4.5. Achieving Quality Production includes other people and departments within the
business
Quality – to produce a good or a service which meets This means that quality needs to be maintained
customer
expectations throughout the
business and no faults should occur.
Quality is important for businesses because: Advantages of total quality management:
It establishes the brand image Quality is built into each part of the production. It
It builds brand loyalty becomes
a habit for the employees
It maintains a good reputation Eliminates virtually all faults/errors before the
It will help to increase sales customers
receives.
Attracts more and new customers No customer complaints so the brand image is
If quality is not maintained, businesses will: improved
Lose customers to other brands/competitors Waste is removed and efficiency increases which
Have to replace faulty products or repeat poor service means less
money is wasted (higher profits)
which
raises costs for business Drawbacks of total quality management
Have a bad reputation because people who had bad very expensive to train employees to check the
experiences
will tell other people, etc. Leads to lower product or
service at every stage of production
sales & revenue relies on employees following the ideology of TQM
Quality Control – Checking for quality
at the end of the
production
process, whether it is a product or a service. 4.6. Location Decisions
Quality control is a traditional way to make sure that
products
leave the factories with no defects Factors that influence the choice
of location of a business:
The jobs of people in quality control departments are to Labour (cost & skills) – how many employees and if
take
samples at regular intervals to check for errors. they
rely on special labour skills
If errors are found, the whole batch of production might Cost of land/premises –big manufacturing companies
have to be
redone. need
lots of cheap land to build
Their job is also to prevent any production errors before Transport links (supplies & distribution) – being close
they
happen during production, which will lead to money to
transport links (i.e. rail road) means that products
loss can be
easily and quickly transported which reduces
Sometimes, businesses bring a mystery customer to test time wasted. and
if business imports lots of
out the
service to check if the quality is as expected components it will be cheaper if
they easy
Advantages of Quality Control: transported
Eliminates faults/errors before the customer receives Sales technique – if a company does online or phone
product or
service sales,
then the company doesn’t need to be in the
Less training is required for the workers centre of the city.
If it relies on personal visits buy
Drawbacks of Quality Control: customers, like retail, it
should.
Expensive, as employees need to be paid to check the What the business does – manufacturing businesses
product
or service are
usually in the outskirts of a city where land is
Identifies the fault but not how and why it occurred so cheaper
because they don’t rely on customer visits. A
it is
difficult to remove the problem retail company
would be near customers
Increased costs if products have to be scrapped or Number / location of competitors – having
reworked
or service repeated competitors
nearby is not always a bad thing. If there
Quality Assurance –checking for the quality standards are many clothes
shops right next to each other, it
throughout the production
process encourages people to visit
area because there is lots
Advantages of Quality Assurance: of choice, increases business.
Eliminates faults/errors before the customer receives Some businesses may decide to locate their operations in
product or
service another
country, to expand operations. the business then
Fewer customer complaints becomes a TNC –
Trans National Company.
Reduced costs if products don’t have to be scrapped Factors influencing decision of which country to locate
or
reworked or service repeated operations
in:
Drawbacks of Quality Assurance: New market overseas - when a business sees an
Expensive to train employees to check products increase in
sales overseas, it may decide to
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move/relocate there, instead

of transporting products Size of business & Legal Form (type of business):
there Public limited companies have larger choice of
Cheaper Source of material – if the raw material runs sources of finance because they pay less interest (less
out,
the business must either bring in alternative risk)
supplies from
somewhere else or relocate to new Amount of capital required: if you need just a little
country with these raw
materials, it also might be money you won’t issue new shares
cheaper than transporting it Purpose of capital & time period: The general rule is
Difficulties with the labour force and wage costs – if that the finance source should match the finance
business is located in country where wages keep need:
rising,
business may decide it is more profitable to If use of capital is long-term, source should be
relocate to
country where wages are lower long-term
(same with short term)
Rents/taxes considerations – if other costs such as Existing Loans: if a business already took out lots of
rent
or taxes increase, this might cause business to loans, banks will think it is too risky to finance
relocate to
countries where it is lower
5.3. Cash-Flow Forecasting & Working
5. Financial information and Capital
decisions Cash is a Liquid Asset – it can be immediately available to
spend on goods & services
Cash Flow – the cash inflows (money received by
5.1. Needs of Capital business) &
outflows (money paid) over a period of time
Cash-Flow Forecast – an estimate of future cash inflows
Finance = Capital = Money and
outflows.
A cash-flow forecast shows the expected cash balance at
Main reasons why businesses need finance:
To start up a business: the money needed to buy the the end of
each month:
essential assets to start trading is the start-up capital Cash flow forecasts are just little charts with values
comparing 2
different time periods (months/years etc.)
To expand the business
To increase working capital Net Cash Flow – The difference between the cash inflow
and
outflow (inflow – outflow)
Working capital - money needed to pay day-to-day costs
There are 2 types of finance needs: Cash flow forecasts are useful because:
Short-Term Finance Needs: Finance needs to pay They show how much cash is available to pay
liabilities or to buy assets
things that last less than a year, (working capital) -
includes wages, rent They show how much money a business might need
to borrow from a
bank
Long-term Finance Needs: long term investments
(that last more than 1 year). Money to buy Fixed They show whether the business is holding too much
Assets (i.e. buildings) cash which
could be reinvested back into business
To complete a cash-flow forecast, just rearrange and use
the
equation (net flow = inflow – outflow)
5.2. Sources of capital Short-term cash-flow problems can be solved by
gathering short-term
sources of finance
The main sources of capital include:
Internal Sources – Obtained by business itself
External Sources – Obtained from outside business
5.4. Working Capital
Examples: Working capital is the money needed to pay day-to-day
Internal sources External sources costs
Issue of shares (if it’s LTD/PLC) Working Capital = Current Assets – Current Liabilities
Retained profit
Bank loans/Micro-finance
Sales of assets
Grants to pay employees A business cannot run without enough working capital
You can measure the success of a business by seeing how
Trade Credit – delay paying suppliers to be in better cash much working
capital it has
position Working capital should be handled properly because it
Long Term Sources – money that can be paid back in shows
investors & banks how efficient a business is and
longer
than one year its financial
strength
Bank loans
Issuing shares 5.5. Income Statements
Owner’s savings
Hire Purchase – When a business buys a fixed asset in For most business, profit is the main objective
monthly payments (which include interest)
The main factors considered in making financial choice:
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Profit is the money left over after total costs have been Revenue
subtracted from the sales revenue. Costs
Gross Profit – the profit made after costs of goods
The simple equation for profit:Profit = Sales revenue – total sold are taken away from sales revenue
costs Net Profit (AKA ‘Profit’) – the profit made after taking
away all expenses and overhead costs (other
Profit can be made by:
expenses)
Increasing the sales revenue, so that it is higher than
Retained Profit – the net profit after taking away taxes
the
production costs
and payments to owners – which is reinvested back
Reducing the production costs
into the
business
Profit is very important, especially for the private sector
companies (not owned by government) Profit Type Equation
Gross Profit Sales Revenue - Costs of goods sold
Gross Profit – Overhead Costs
Net Profit
(wages, electricity, rent, marketing)
Retained Profit Net Profit – (tax + dividends)
Income statements are very important in decision making

in a
business
If a business is thinking to relocate a factory, they will
make a
forecast income statement in both locations and
compare
5.6. Balance Sheets

Balance Sheet – a document that shows the value of the
business’
assets and liabilities in a point in time
A balance sheet
Assets – Items of value owned by a business
Profit is a reward for risk taking: investors &
Liabilities – Debts owed by business
entrepreneurs
take lots of risks when investing money
There are 2 types of assets:
Profit is a reward for enterprise: entrepreneurs and
Current Assets – (Short-term Assets) Items owned by
workers put
lots of effort to make business succeed
business
for less than 1 year
Profit can be re-invested back into business: the retained
i.e. Raw material, cash

profits can be put onto business to expand
Non-Current Assets – (Long-term Assets) Items owned
Profit indicates that the market might be successful: a
by
business for more than 1 year
market
where most businesses are making profit would
i.e. Buildings, land, company cars
be a good market for

an entrepreneur to start their own
There are also 2 types of liabilities:
Profit ≠ Cash Current Liabilities – (Short Term Liabilities) Debts
owed by
business for less than 1 year
Profit can be in the form of cash, but it can also be in the i.e. Bank overdrafts, wages
form of
credit (customers will pay later) Non-Current Liabilities – (Long Term Liabilities) Debts
If a company makes 40,000 dollars in sales, but only owed
by business for more than 1 year
20,000 dollars is in cash and the other 20k is in credit. The i.e. Long-term bank loans, creditors (money
that
business only has 20,000 dollars in cash to pay costs. business owes
to suppliers)
Credits can vary from a week to a year, it is ‘promised’ the Total Equity (AKA Shareholders’ funds) is how much a
cash but
not physical, and can’t pay for costs. business is worth. (only for Limited companies)
So, in this case, if the business makes 40,000 dollars, and
Shareholders’ Funds = Total Assets – Total Liabilities

the costs are 15,000 dollars it will make 25,000 dollars in The shareholders’ funds is the total amount of money
gross profit (theoretical profit), but only 5,000 dollars in invested in a
business by the shareholders/owners
net profit If the total equity of a business has increased/fallen, the
Income Statement – A business account that records all shareholder’s stake of the company will be worth
the
incomes of a business and all the cost payed over a more/less,
respectively
year – to see if
it is making profit.
It will be used by managers, banks and other investors to From a balance sheet, you can calculate the
see if a
business is making profit:
Working Capital = Current Assets - Current Liabilities

to compare with previous years - if it is greater than You can also calculate the Capital Employed – the long-term
the year
before capital
invested in a business
To see if it is higher than competitors Capital Employed = Non-Current
Assets + Total Equity
The main features of an income statement include: Total Equity = Shareholders’ funds
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Limited companies must publish their accounts for the

5.7. Analysis of Accounts
public to see.
IT is used for ratio analysis.
All types of stakeholders will be interest in seeing these
Using all of the documents and information from cash
accounts
to see how well the business is doing. i.e.:
flow forecasts,
balance sheets and income statements
Managers: to keep an eye on the performance of the
you can rate the performance of
a business
business.
Compare ratios with competitors & previous
Analysis of accounts is interpreting these
years to make
decisions.
accounts/documents to see
how a business is doing
Shareholders & potential investors: They will see how
To rate a company’s performance, you can use 5 ratios
profitable a business is using the ratios to see if it is
There are 2 types of ratios:
worth
investing in it. See how much business is worth
Profitability Ratios – how profitable a business is
Banks: see if business is performing well to calculate
Liquidity Ratios – how able a business is to pay its
the
risk on whether to give out a loan or not.
short-term debts (current liabilities)
Employees: to see how safe the business (and their
Profitability Ratios:
jobs)
are.
Gross Profit Margin (%) – how good a company is at
converting sales into gross profit. A percentageGPM
(%) = 100 × Gross Profit / Sales Revenue
6. External influences on
Net Profit Margin (%) – how good a company is at
business activity
converting
sales into net profit. A percentageNPM (%)
= 100 × Net Profit / Sales Revenue 6.1. Government Economic Policies &
Return on capital employed – how profitable a
Objectives
company is
compared to the amount of money
usedRoCE (%) = 100 × Net Profit / Capital Employed Inflation – The increase of average prices of goods &
One profitability ratio isn’t useful by itself. You need to services
use all
the profitability ratios and compare it with Governments want 3 main economic objectives:
previous years of the
business. Low Inflation: Low prices of goods & services, so
Liquidity Ratios: people
will buy more, more money in economy
Current Ratio – how good a company is to pay off its Low Unemployment: High % of people working so
current liabilities with its current assets Current Ratio that they
don’t rely on government funds
= Current Assets / Current Liabilities Economic Growth: growth of the GDP (Gross Domestic
Acid Test Ratio – measures the ability of a company to Product)
of a country – more goods and services being
pay off its liabilities without depending on the sales of produced and sold
inventory Acid Test Ratio = current assets−inventories Balance of payment (of Imports & Exports): the
currentliabilities
difference
between the imports and the exports of a

The acid test ratio is used to measure if a business is

country balance out
(BoP = Exports – Imports)
likely to
survive in the future
Exports are goods/services sold from one country to
The good and bad values of these ratios:
another – and
they bring money into a country
Gross Profit Margin (%) No exact value, you must Imports are the opposite
compare with: Competitor An economy does not grow steadily, there are bumps
Net Profit Margin (%) where the economy
does not grow at all
businesses, previous years, the
ROCE (%) targets set by the business Recession – A period of falling GDP
Economies go through the ‘Business Cycle’:
Current Ratio Should be above 1.5 to be safe
Should be above 1, unless you 1. Growth: GDP is rising, unemployment falling,
are dealing with cash sales in businesses
succeeding & higher living standards
Acid Test Ratio
which it can be above 0.75 (cash 2. Boom: Higher living standards so people start
is liquid - pays of liabilities easily) spending more money, so prices increase – business
costs will also rise
Having lots of stock may mean that the company might 3. Recession: people become uncertain about their jobs
be illiquid
because inventories are hard to convert to cash so they
don’t spend money. Many workers lose their
easily jobs because of lack of
demand & profit in a business
Liquidity is very important for a business: 4. Slump – A long-term, serious recession:
If they can’t convert their assets into cash, they won’t Unemployment will be
very high, GDP has decreased
be able
to pay their suppliers (current liabilities) a lot and many businesses will not
survive and go
Not paying suppliers will force them to stop trading to bankrupt
pay back
their debts
6.2. Government Economic Policies
5.8. Why and how accounts are used:
WWW.ZNOTES.ORG
There are 3 main ways governments can influence the How it

economy (AKA
economic policies): affects
Government expenditure
Tax What it is
business
Changing tax rates activity
Interest Rates Prices of
Government Expenditure is how the government spends goods will
the money made
from taxes. It is usually spent on increase so
education, defense, healthcare,
public transport, etc.… Tax added to prices of
less people
Companies that are involved in these markets/sectors Indirect Tax (VAT) goods & services (varies
will buy
above will
benefit. i.e. a bus manufacturing company will within types of products)
them – Less
benefit if government
spends more on public transport demand for
Spending more on these markets will boost economy in a a business
country (more
jobs created, more demand)
Local
There are 2 types of taxes:
businesses
Direct Taxes – taxes paid directly from incomes (of
will have
individuals as wages or as business as revenue)
more
Indirect Taxes – VAT, taxes added to prices of goods
demand
Out of these 2 types, there are 4 common taxes that
because
affect business
activity:
there less
How it Tax on imported goods imported
affects from other countries. \n goods,
Tax What it is Import Tariffs & Import Quota is a physical Importing
business
activity Quotas (indirect) limit to the amount of raw
products that can be materials
People have
imported. from abroad
less
will be much
disposable
more
income
Tax on people’s incomes – expensive –
(money after
\n You can either have a products will
tax). They
set tax (i.e. 20% of be more
Income tax (direct would have
income) expensive –
tax) less money
or Progressive income tax, sell less
to spend on
where richer people pay
goods or
higher taxes.
services. 6.3. Interest Rates
Businesses
have less The interest rate is the amount charged for borrowing
revenue. money from a
bank
If tax rates In most countries, the interest rates are fixed by the
increase: government
Harder for a the % of the interest rate is called the monetary policy
business to The effects to business activity due to having higher
expand (less interest rates
include:
profit) less Less profit for companies that already took out a loan
Tax on profits made by money to -
less/slower expansion of a business.
Profits Tax (direct Entrepreneurs thinking of starting business might not
businesses (a set reinvest
tax) be able to
afford to take out a loan
percentage) back into
business, If consumer loans (i.e. mortgages) increase, people
Fewer will have
less disposable income – less demand for
people will goods
start their Higher exchange rates of currency
own Businesses might respond to all of these policies by:
business
Policy Business Response
Lowering production costs to
Higher income tax be able to sell goods for lower
prices
WWW.ZNOTES.ORG
Policy Business Response How and why it

Type of pressure What it is
Focusing on the domestic responds
market, Buying materials from a group of people
Higher tariffs (on imports)
local companies rather than who want to
from companies abroad change policies /
Lots of public
Reduce investment for business decisions of
support, Very bad
growth, Lower prices of goods businessesThey
Higher interest rates Pressure group brand image &
for consumers, Sell assets for lead to consumer
reputation, Loss in
cash to reduce loans boycotts -
sales
consumers not
buying their
6.4. Environmental & Ethical Issues products
Government
Business activity can impact the environment in many Laws passed by making certain It is more expensive
different ways,
including: Government activities illegal (i.e. to manufacture
Air pollution made by factories & transportation dumping waste)
Water & land pollution from improper waste disposal
If a business
Increase carbon emissions – global warming
produces more
Most business decisions lead to benefits and costs. There
pollution than the Costs of business
are
private and external benefits and costs Fines
government allows, increase
Private costs & benefits are costs that a business pays for,
they pay heavy
and the
benefits the business gains
fines.
External Costs – costs paid by society, rather than the
business
(as a result of business decision)
External Benefits – gains to society, rather than the Governments sell ‘permits’ to companies that allow it to
pollute the
environment up to a certain level
business
(as a result of business decision)
Firms that pollute less than the government allows, can
The possible external costs and benefits of a business
decision
might include: sell their
permit to companies that pollute more
This motivates businesses to pollute less, to earn money
External Costs External Benefits Ethics – “doing the right thing” - the moral principles
Most businesses have to face many ethical decisions, they
Environment is harmed from Jobs are created, economy is
have to
decide whether to act ethically or have higher
waste products boosted
profits
Pollution may damage the Other companies might move Unethical decisions include:
health of people in, more services Employing child workers, even though it might not be
Less energy Better infrastructure illegal in
some countries
Increased traffic Better living standards Buying supplies that lead to damage of the
environment
these externalities change depending on the decision. Paying managers large bonuses while having their
Sustainable development – development that does not workers in
minimum wage & poor conditions
compromise
the living standards of future generations Offering bribes to people to gain information
Businesses can contribute to sustainable development by Different companies have different ethical standards
doing 4 main
things: because people
have different moral codes
Businesses may respond to ethical issues by following
1. Using renewable energy (wind, solar) their moral
code and “doing the right thing”
2. Recycling & reusing their waste These decisions have benefits and disadvantages:
3. Using less natural resources (lean production)
4. Developing environmentally friendly products & Benefits Disadvantages
packaging (i.e.
biodegradable packaging) Consumers appreciate the
efforts made by the company
People & consumers pressure companies to think more Higher costs of production
and so they buy more from
environmentally.
There are many reasons and ways
them
businesses give the environment a
higher priority:
Pressure groups - a group of people who want to change Higher prices – might lead to
Creates good publicity
policies/decisions of businesses or the government. less demand
Pressure groups acting on unethical decisions made by a In some places families
business
will lead to a consumer boycott - consumers not Less risk of lawsuits depend on their children to
buying their
products earn money
Environmentally friendly businesses can use the fact that Easier to find workers
they are
environmental as a marketing advantage
WWW.ZNOTES.ORG
6.5. Business and the International Benefits to the business Benefits to the country
Closer to market More exports
Economy Avoid expensive taxes of
import of goods (i.e. Korean Tax – more money to
Globalization –the world becoming more interconnected
cars (KIA) being produced in government
leading to
increasing worldwide trade & people moving
EU to benefit from free trade)
The reasons for globalization include:
More Free-Trade Agreements – imports/exports Spread risks (if there are low
Increased product choice for
between
countries that pay no tariffs sales in one country and high
consumers
Easier, cheaper and faster transportation between sales in another)
countries
E-commerce allows products to be bought from all However, there are potential drawbacks to the country:
over the world Less sales for local businesses, might go bankrupt
Industrializing countries (i.e. India & China) can ‘Repatriation of profits’ – profits are sent back to
produce
products at very low prices home
country and doesn’t benefit country located
Business has lots of influence on government – they
The opportunities and threats of globalization to a can threaten
to leave the country
business
include: They can use up scarce resources in the country
Opportunities Threats
6.7. Exchange Rates
Increasing foreign
Businesses can sell abroad, competitors importing their Exchange Rate – the price of one currency in terms of
increasing sales products, leading to less sales another
currency
(& profit) For example, 1 Euro is equivalent to 1.2 Dollars
Opening factories or offices Currency Appreciation – when the value of a currency
Workers in home country
abroad – can be cheaper to increases
(i.e. 1€ = 1.2$ → 1€ = 1.7$) - it can buy more of
might leave for higher wages
produce, but it is expensive another currency
in other countries
to set up Currency Depreciation – when the value of a currency
Importing materials from More foreign companies set decreases
abroad – can be cheaper but up operations in the home (i.e. 1€ = 1.2$ → 1€ = 1.1$) – it can buy less of another
transport costs can be too country of the business, currency
high more competition The exchange rate of a currency is influenced by 2 things:
Importing goods from abroad Demand for the currency: if many people want to buy
and selling it in home country the
currency the price will increase because there is a
‘limited’
number of currency (appreciate)
Sometimes governments introduce import tariffs and Supply of currency: if the central bank prints more
quotas to protect
local businesses – this is called money,
the supply increases but the demand is still
Protectionism the same so the
value is lower (depreciation)
They believe that by reducing the number of foreign Exchange rates can affect businesses by:
competitors and
goods (that would have much lower
prices), there will be less
unemployment and higher If it Appreciates: If it Depreciates:
incomes Import prices rise: your
Import prices fall: since your
However, by doing this, it is harder for local businesses to currency is worth less so you
currency can buy more of the
import
materials and export their goods abroad need more to buy other
other currency
currencies
6.6. Multinational Companies (MNCs) Export prices rise: your Export prices fall: it is worth
currency is worth more so it less so other currencies can
Multinational Company = Transnational Company is more expensive for other buy your currency for les of
A multinational company is a company that has factories
currencies to buy it theirs
or service
operations in more than one country
It is not just selling products abroad, it is having This means that if the currency Appreciates:
operations
abroad The product’s price in other countries will increase
The benefits of a business becoming international: Business will make more profit
Business can lower the price and still make the same
Benefits to the business Benefits to the country amount of
money as before – it is more competitive
Producing goods at lower
Jobs are created If the currency depreciates:
costs
The products price in other countries will decrease
Investments in development less profit will be made
Closer to resources (i.e. oil)
of infrastructure in country
WWW.ZNOTES.ORG
Business needs to raise the price to make the same

amount of
money as before – less competitive
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CAIE IGCSE
BUSINESS STUDIES (0450)
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Caie Igcse: Business STUDIES (0450)

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UPDATED TO 2020-22 SYLLABUS

1.4. Added Value

Added Value = selling price – total cost

Self-confident Measurements Limitations

1.13. Problems with business growth 1.16. Partnerships

1.15. Sole Trader 1.17. Private Limited Company (LTD)

Advantages Disadvantages The franchisee is the individual to start up franchise

Service to community – provide jobs, support

1.24. Stakeholder objectives

2.2. Key Motivational Theories

(fulfilled by receiving wages) 2.3. Methods of Motivation

Communication is faster and more accurate

In organisational charts, it is usually arranged in

Laissez-Faire Leader: Where the manager makes

a promotion. 1. Off-the-job training – where the employee is trained

Market – the total number of customers, potential

Market research is important because a business needs Benefits Limitations

As you can see different stages can influence marketing

it will cover costs and make sure profit will be made

Advantages Disadvantages There are many types of promotion methods a business

Advertising media include:

The opportunities and threats of e-commerce to a

Problem Method to overcome Efficiency is increased by either:

4.3. Costs and Scale of Production

Management Salaries: they are set regardless of units

move/relocate there, instead

Income statements are very important in decision making

5.6. Balance Sheets

i.e. Raw material, cash

be a good market for

Shareholders’ Funds = Total Assets – Total Liabilities

Working Capital = Current Assets - Current Liabilities

Limited companies must publish their accounts for the

The acid test ratio is used to measure if a business is

There are 3 main ways governments can influence the How it

Policy Business Response How and why it

Business needs to raise the price to make the same

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