IGCSE
BUSINESS STUDIES
CIE
Factors of production




Land > all natural resources
Labour > number of people available to work
Capital > machinery, equipment, finance
Enterprise > the skill and risk-taking ability of the person who brings the other resources or
factors of production together to produce a good or service
Specialization
Advantages
Higher quality produced/Higher output >
more products to sell/ increase sales
Production workers are trained in one
task > quick to train/ cheaper to train
workers
Fewer mistakes made > less wastage/
fewer customer complaints/ reduce costs
of production
Quicker to produce output/increased
efficiency
Performing only one task makes workers
become a skilled expert/ employees
specialized in what they are good at >
more efficient/ more job satisfaction









Disadvantages
Workers may become bored doing the
same task repeatedly > become less
efficient/ slow down production
Less motivated/ less job satisfaction >
more likely to leave the business
Workers cannot cover for absent
colleagues > slow down production
Lose other skills as only use skills for one
task
How business increase added value

If the increase in added value is greater than the costs of achieving it, profit will rise.
Increase Selling price
1. Branding > people want to or feel they should buy the item from this particular company
2. Excellent service quality > providing a high-quality, personalized service
3. Product features> more features and functions > consumers are prepared to pay a much
higher price
4. Convenience> consumers prefer goods and services which they can have immediately or
which save them time
Customers will be willing to pay higher price – there is a large difference between the input costs
and price
Reduce costs such as
1. Buy cheaper raw materials by changing suppliers/ buying in bulk to gain a discount/
negotiate with suppliers for cheaper price (OR) Source cheaper ingredients from home
country instead of importing ingredients
2. Lower the quality of inputs
3. Reduce the amount of inputs needed
Increase gap between price and input costs and therefore increase added value
Chapter 1 to 3
IGCSE
BUSINESS STUDIES
CIE
Classification of businesses
1. Primary sector > farming, fishing, forestry, mining
2. Secondary sector > refining, manufacturing, construction
3. Tertiary sector > shops, restaurants, banks, cinemas, airlines
Characteristics of successful entrepreneurs
1. Innovative > new ideas for goods and services or new ways of presenting existing goods and
services
2. Risk taker > they are prepared to take risks, knowing that failure is a possibility
3. Self – confident
4. Self – motivated
5. Strong leadership qualities > good communication skills, the ability to motivate others, and
are good decision-maker
6. Good at networking
7. Hard working
Benefits of being an entrepreneur
 Independence
 Income may be high
 Use own skills/interests
Disadvantages of being an entrepreneur
 Risk
 Lack of business experience
 Capital needed
Contents of a business plan





The objectives of the business
Products and services
The market
Financial forecasts
Organization structure and management
How business plans assist entrepreneurs



Persuade lenders such as banks and investors to provide finance to the business
Gives the business a sense of purpose and direction
Objectives and financial forecasts provide the business with targets to aim at and enable the
business to monitor its progress
Start-ups bring following benefits to the economy:




Job creation > reduce unemployment
Increase competition > results in lower prices and better quality of goods and services
Increase output > a variety of products available > create a greater consumer choice in the
market
Can grow further
Most common types of government support include:




Grants and interest free or low-interest loans
Lower taxation rates on profits in the early years
Rent – free premises for a certain period of time
Training for employees
Chapter 1 to 3
IGCSE

BUSINESS STUDIES
Advice and support sessions offered by experienced business people
Measuring business size
1. Value of capital employed > the value of all long-term invested in a business
 Different industries > different capital investment
2. Value of output > especially in manufacturing industries
3. Value of sales > especially in retailing businesses
4. Number of employees
5. Market share > the larger the share of the total market, the larger the business
Benefits of business expansion
1.
2.
3.
4.
5.
Increase in profits
Increase in market share
Economies of scale / lower average costs
Greater power to control the market/ more status and prestige
Protection form the risk of takeover
Different ways business can grow


Internal growth
 Increasing the number of goods it can produce
 Developing new products
 Finding new markets for its products
External growth
 Horizontal integration > same industry, same stage of production
 Forward vertical integration > same industry, closer to the consumers
 Backward vertical integration > same industry, closer to the raw material supplies
 Conglomerate integration > completely different industries
Take over the other business


Advantages
Benefit from economies of scale >
helping to reduce average costs
Increase market share by removing
competitor



Problems linked to business growth





Diseconomies of scale
Poor communication
Expansion costs
Different management styles of two businesses >
Loss of control
Chapter 1 to 3
Disadvantages
If it’s in same industry, doesn’t spread
risk > falling demand for the whole
industry will reduce sales
Different management styles > may
reduce productivity
Risk of diseconomies of scale > as
communication errors may arise
CIE
IGCSE
BUSINESS STUDIES
CIE
Why some businesses remain small
1. The product is specialized > not suitable to be produced on large scale > designed to needs
of customers
2. Owner’s objectives/ preferences > to keep work life balance
3. Market size > doesn’t have a large market/ sales are low
4. Easier to manage/ control > does not have personal skills to manage a larger business >
keeps closer links with employees and customers
5. Lack of finance/ fewer finance options
Reasons for business failure






Poor planning and lack of objectives > such as marketing, finance, profit predictions
Liquidity problems > must be enough cash coming into the business to pay the expenses and
other debts / poor cash management (if busienss does not have enough cash to pay its
expenses and debts)
Poor marketing > inadequate research (potential market size, level of competiton, what
consumers want)
Lack of finance
Competition
Economic influences > unemployement, high interest rates, taxation may reduce the amount
of money consumers have to spend on goods and services > reduce sales and profits
Chapter 1 to 3