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Business Studies for Cambridge IGCSE & O Level Brian Titley

The most forward-thinking and rigorous approach for the modern Business Studies classroom

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Complete Business Studies for 978 019 831086 0 £22.50 Cambridge IGCSE and O Level

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Revision tips are

integrated, along

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exam-quality

responses.

A comprehensive and thorough approach which will challenge your students and get the best results

Complete coverage of the most recent Cambridge IGCSE and O Level syllabuses

Help students learn how they learn best. More exercises and revision notes are included on a free CD-ROM for extra flexibility.

1vi Business and the environment in which it operates Business activity

Business buzzwords

Key PoINTs

1.1 Business activity 1.1.1 Business activity as a means of adding value and meeting customer needs

1.1.2 Classification of local and national firms into primary, secondary and tertiary sectors

1.1.3 Business growth and measurement of size

1.1.4 Key features of a national economy

1.2 The organization 1.2.1 Business objectives and their importance

1.2.2 Stakeholders and their differing objectives

1.2.3 Aims of private and public sector enterprises

1.3 The changing business environment

1.3.1 Government influence over decision making by using economic policy measures

1.3.2 Impact of technology on business

1.3.3 Business reaction to market changes

1.4 Economic environment 1.4.1 Mixed and market economies

1.4.2 International trade (access to markets and tariffs)

1.4.3 Problems entering new markets abroad

1.4.4 Competition and business

1.4.5 Exchange rates and how changes in them affect business

Assessment exercises • Suggestions for coursework • Examination questions

1 Business and the environment in which it operates

{ Business involves organizing and combining resources into firms to produce goods and services to satisfy needs and wants of consumers.

{ Resources, or factors of production, are used to make goods and services.

{ Resources are scarce. There are not enough to produce everything we need and want. We must choose between alternative uses of resources.

{ Resources include land (natural resources), labour (human effort), capital (man-made resources) and enterprise (the knowledge and skills people need to own and run business organizations).

{ Resources are inputs to productive activity and products (goods and services) are outputs from productive activity.

{ Business activity adds value to resources by using them to produce goods and services that are more desirable to consumers.

{ Firms owned by private individuals are private enterprises. Most firms aim to make a profit but some, like charities, engage in non-profit making activities.

{ Some business organizations are owned and controlled by government authorities. These are public enterprises. Many provide public services.

Consumers – people and organizations who are willing and able to buy goods and services.

Consumption – the using up of goods and services to satisfy consumer needs and wants.

Production – using resources to make goods and services to satisfy consumer needs and wants.

Factors of production – productive resources used to make goods and services.

Firms – organizations that produce goods and services.

Entrepreneur – a person with the know-how and willingness to take the risks and decisions necessary to set up and run a business.

Opportunity cost – the benefit lost by not consuming or producing the next best alternative product.

Wages and salaries – payments made by firms to employees to use their labour for productive activity.

Customers – consumers who buy goods or services from business organizations.

Revenue – proceeds from the sale of goods and services to customers.

Profit – a surplus of revenue over costs of production.

Value added – the difference between the price of a product and the cost of the natural and man-made materials, components and resources used to make it.

1.1 Business activity

1.1.1 Business activity as a means of adding value and meeting customer needs

Fundamental ideas are outlined

at the start of each chapter, preparing

students for the unit ahead

Tricky vocabulary is clearly defined in advance,

helping language-learners to focus on the subject material

6 Business structure, organization and control

Understanding business organizationBusinesses are organized according to how they are owned, controlled and financedFrom the last section you will recall there are a number of different types of business organization in the private sector of an economy. They vary according to:

In this section we will look at each type of business organization in these terms.

The sole traderThe sole trader is the oldest and most popular type of business organization

A sole trader or sole proprietership is a business organization owned and contolled by one person. They may employ other people to work in the business, but it will only ever have one owner.

Most businesses are sole traders. It is the oldest and most common form of business organization in the world. Many small businesses run local shops or provide personal services such as hairdressing, plumbing, building and vehicle repairs. Many of today’s largest corporations started out as sole traders many years ago.

Most sole traders finance their business from their personal savings, borrowing from friends and family or from a bank loan. However, banks are often unwilling to lend to sole traders because they are considered risky enterprises. They can face considerable

competition from larger businesses and other small businesses, and many close down within their first few years of operation.

Modern technology has reduced the cost of starting up a new small business. Many sole traders can operate their businesses from home thanks to the Internet and mobile communications which allows them to keep in contact with customers and

suppliers. However, in the event of business failure the sole trader will be liable for all the business debts.

who owns the business

how it is controlled

how it is financed

the owners’ liability to repay business debts.

7Ownership and internal organization

ACTIVITY 2.1

From the article identify and list the main features, advantages and disadvantages of a sole trader business.

Advantages of a sole trader Disadvantages of a sole trader

+ Businesses operating as sole traders are easy to set up. There are usually few legal requirements involved in business registration.

+ These businesses can often be set up with little capital.

+ The owner is his or her own boss and has full control over the business.

+ The owner receives all profits after tax and therefore has an incentive to work hard.

+ Personal contact with customers can increase customers’ loyalty.

+ Separate accounts are not required for the business.

- The owner has full responsibility for running the business from day to day. This may mean working very long hours and going without holidays.

- The business may lose revenues and profits if the owner is off sick or on holiday and cannot manage the business.

- The owner has unlimited liability to repay any business debts.

- Sole traders often lack capital to buy new equipment or to expand.

- Sole traders often lack all the skills they need to run their businesses successfully.

‘I enjoy cooking but had been unemployed for some time,’ Saabira explained.

‘By running my own business I am ensured a job but I get to be my own boss and keep all the profits I make. Not that I have made any yet,’ she laughed. ‘I have to work every hour I can to run the business, whether it is buying ingredients, cooking and preparing food, serving, cleaning and even keeping the accounts. If I had the time and money I would hire some employees to help me!’

Starting your own business can be an expensive and risky business as Saabira found out. ‘Banks wouldn’t lend me any money. They said there was too much competition and my business could be at risk.’

Instead Saabira had to use all her savings to buy equipment and pay the deposit on her shop premises.

‘Monthly bills for ingredients, electricity and my mobile phone are also high,’ she said. ‘I must earn at least $400 in revenue each month just to break even. I’d love to take a few days off but I wouldn’t make any money.’

‘Then of course, if the business fails I will have to repay any business debts even if it means selling my possessions to do so! But I plan to make the business a success and so far, so good!’

Bitesize can also provide sandwiches and pastries for business functions and parties.

Pop in for something BitesizeCustomers of Bitesize, the new sandwich and coffee bar in the town, can look forward to good food and a personal, friendly service, according to owner Saabira Rahman. She was busy preparing fresh sandwiches, snacks and lots of delicious pastries for local shoppers and office workers when we popped in to sample her menu. We asked her why she had decided to open her own business.

‘I ENJOY cooking but had been unemployed for some time,’ Saabira explained.

‘By running my own business I am ensured a job but I get to be my own boss and keep all the profits I make. Not that I have made any yet,’ she laughed. ‘I have to work every hour I can to run the business, whether it is buying ingredients, cooking and preparing food, serving, cleaning and even keeping the accounts. If I had the time and money I would hire some employees to help me!’

Starting your own business can be an expensive and risky business as Saabira found out. ‘Banks wouldn’t lend me any money. They said there was too much competition and my business could be at risk.’

Instead Saabira had to use all her savings to buy equipment and pay the deposit on her shop premises.

‘Monthly bills for ingredients, electricity and my mobile phone are also high,’ she said. ‘I must earn at least $400 in revenue each month just to break even. I’d love to take a few days off but I wouldn’t make any money.’

‘Then of course, if the business fails I will have to repay any business debts even if it means selling my possessions to do so! But I plan to make the business a success and so far, so good!’

Bitesize can also provide sandwiches and pastries for business functions and parties.

Important keywords are highlighted, with a glossary to ensure concepts are fully understood

A truly global approach filled with international

case studies and examples makes the

book relevant to students internationally

Case studies depict scenarios students

can relate to, bridging the gap between the theory and the real

world

Concepts are fully explored and broken down into manageable segments which are easier for students to absorb

Modern and highly visual design makes

the content more accessible to students, increasing

motivation and enthusiasm

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