CAIE IGCSE BUSINESS STUDIES (0450) 1. Definitions 1.1, Understanding business activity 1 2 10, " 12, 13, 14, 15. 16 17, 18, 19, 20. 2 ‘Anneed is a good or service essential for living ‘A want is a good or service which people would like to have, but which is not essential for living, People's wants are unlimited Economic Problem- There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants, This creates scarcity Factors of production are those resources needed to produce goods and services. There are four factors of production and they are in limited supply Scarcity is the lack of sufficient products to fulfil the total wants of the population Opportunity cost is the next best alternative given up by choosing another item Specialization occurs when people and businesses concentrate on what they are best at Division of labour is when the production process is split up into different tasks and each worker perfarms ‘one of those tasks. tis a form of specialization Businesses combine the factors of production to make goods and services which satisfy people's wants ‘Added value is the difference between the selling price and the cost of bought-in materials and components The primary sector of industry extracts and uses the natural resources of Earth to produce raw materials used by other businesses, The secondary sector of industry manufactures goods using the raw materials provided by the primary sector The tertiary sector of industry provides services to ‘consumers and other sectors of industry De -industrialisation occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country Mixed economy has both a private sector and a public (state) sector Capital is the money invested into the business by the ‘An entrepreneur is a person who organises, operates and takes the risk for a new business venture Capital employed is the total value of capital used in the business Internal Growth occurs when a business expands its existing operations External Growth is when a business takes over or merges with another business. It is often called integration as one business is integrated into another A takeover or acquisition is when one business buys ‘out the owners of another business, which then WWW.ZNOTES.ORG 22, 23, 24 25, 26. 27. 28, 28 30. 3 32 33, 34, 36. 36. 37. 38, 38, 40, becomes part of the ‘predator’ business [the business which has taken it over] ‘A merger is when the owners of two businesses agree to join their businesses together to make one business Horizontal integration is when one business merges with or takes over another one in the same industry at the same stage of production Vertical integration is when one business merges with or takes over another one in the same industry but at a different stage of production. Vertical integration can be forward or backward, Conglomerate integration is when one business merges with or takes over a business in a completely different industry. This is also known as diversification, Sole trader is a business owned by one person Limited liability means that the liability of shareholders in a company is limited to only the amount they invested Unlimited liability means that the owners of a business can be held responsible for the debts of the business they own, Their liability is not limited to the investment they made in the business Partnership is a form of business in which two or more people agree to jointly own a business Unincorporated business is one that does not have a separate legal identity. Sole traders and partnerships are unincorporated businesses incorporated businesses are companies that have separate legal status from their owners Shareholders are the owners of a limited company. They buy shares which represent part-ownership of the company, Private limited companies are businesses owned by shareholders but they cannot sell shares to the public. Public limited companies are businesses owned by shareholders but they can sell shares to the public and their shares are tradable on the Stack Exchange Dividends are payments made to shareholders from the profits [after tax] of a company. They are the returns to shareholders for investing in the company. A franchise is a business based upon the use of the brand names, promotional logos and trading methods of an existing successful business. The franchisee buys the license to operate this business from the franchisor A joint venture is where two or more businesses start ‘anew project together, sharing capital, risks and profits ‘A public corporation is a business in the public sector that is owned and controlled by the state (government) Business objectives are the aims or targets that a business works towards Profit is total income of a business [revenue] minus total costsCAIE IGCSE BUSINESS STUDIES (0450) 41, Market share is the percentage of total market sales held by one brand or business 42, A social enterprise has social objectives as well as an alm to make 2 profit to reinvest back into the business 43. A stakeholder is any person or group with direct interest in the performance and activities of a business 1.2. People in business 1. Motivation is the reason why employees want to work. hard and work effectively for the business 2. Wage is a payment for work, usually paid weekly 3, Time rate is the amount paid to an employee for one hour of work 4, Plece rate is an amount paid for each unit of output 5, Salary is payment for work, usually paid monthly. 6. Bonus is an additional amount of payment above basic pay as a reward for good work 7. Commission is payment relating to the number of sales made 8, Profit sharing is a system whereby a proportion of the company's profits are pald out to employees 9, Job satisfaction is the enjoyment derived from feeling that you have done a good job 10, Job rotation involves workers swapping around and {doing each specific task for only a limited time and then changing around again 11. Job enrichment involves looking at jobs and adding tasks that require more and/or responsibilty 12, Team-working involves using groups of workers and allocating specific tasks and responsibilities to them 13, Training is the process of improving a worker's skills 14, Promotion is the advancement of an employee in an organisation, for example, to a higher job/managerial level 15. Organisational structure refers to the levels of management and division of responsibilities within an organisation 16, Organisational chart refers to a diagram that outlines the internal management structure 17. Hierarchy refers to the levels of management in any ‘organisation, from the highest to the lowest. 18. Alevel of hierarchy refers to managers/supervisors/other employees who are given a similar level of responsibility in an organisation 19, Chain of command is the structure in an organisation Which allows instructions to be passed down from senior management to lower levels of management 20. The span of control is the number of subordinates working directly under a manger 21. Directors are senior managers who lead a particular department or a division of a business 22, Line managers have direct responsibility for people below them in the hierarchy of an organisation 23, Supervisors are junior managers who have direct, control over the employees below them in the WWW.ZNOTES.ORG 24 25 26. 27. 28 28. 30. a 232, 33, 34, 35, 36, 37 38 39, 40, 1 42, 43, organisational structure Staff managers are specialists who provide support, information and assistance to line managers. Delegation means giving a subordinate the authority to perform particular tasks Leadership styles are the different approaches to dealing with people and making decisions when in apposition of authority - autocratic, democratic and laissez-faire Autocratic leadership is where the manager expects to be in charge of the business and to have their orders followed Democratic leadership gets other employees involved in the decision-making process Laissez-faire leadership makes the broad objectives of the business known to employees, but then they are left to make their own decisions and organise their ‘own work Recruitment is the process from identifying that the business needs to employ someone up to the point at which applications have arrived at the business Job analysis identifies and records the responsibilities and tasks relating to a job Job description outlines the responsibilities and duties to be carried out by someone employed to do a specific job Job specification is a document which outlines the requirements, qualifications, expertise, physical characteristics, etc,, for a specified job Internal recruitment is when a vacancy is filled by someone who is an existing employee of the business External recruitment is when a vacancy is filled by someone who is not an existing employee and will be new to the business induction training is an introduction given to a new ‘employee, explaining the business's activities, customs and procedures and introducing them to their fellow workers. COn-the-job training occurs by watching a more experienced worker doing the job Off-the-job training involves being trained away from the workplace, usually by specialist trainers. Workforce planning is establishing the workforce needed by the business for the foreseeable future in terms of the number and skills of employees required Dismissal is when employment is ended against the will of the employee, usually for not working according to the employment contract Redundancy is when the employee is no longer needed and so loses their job. itis not due to any aspect of their work being unsatisfactory A contract of employment is a legal agreement between an employer and an employee, listing the rights and responsibilities of workers ‘Communication is the transferring of a message from the sender to the receiver, who understands the message