Business & ManagementCambridge IGCSE

Business Revision notes

These notes cover essential topics and provide in-depth knowledge to help you prepare effectively for your exams. Here are some of the chapters....
Business Revision notes

Scarcity– Unlimited wants but not enough products.

Factors of production

  • Land – Natural resources from nature such as trees, forests and oil

  • Labour – Number of workers available to make products.

  • Capital – Money required for a business to produce items.

  • Enterprise – Entrepreneurs with skills required to create a business.

Opportunity Cost – A certain value that must be given up achieving something else.

Specialisation – Workers/machines specialises in some part of the production process.

Economic Sectors
  • PrimarySector – Extracts and uses the natural resources from the earth. e.g. Fishing, farming
  • SecondarySector – Manufacture goods using raw materials from primary sector. e.g. Car manufacturers and other factories
  • TertiarySector – Provides service to consumers and other sectors of the industry e.g. Restaurants, car showroom, travel agent

De-industrialisation – when manufacturing sector becomes less important in a country.

Private Sector


  • High efficiency and lower costs
  • Competition is encouraged (prices will be lower)


  • Some services may be closed (run out of money)

  • Workers may lose jobs to improve efficiency/cut cost

Public Sector


  • Business is funded by government

  • Encourage more jobs


  • Low efficiency
  • No competition between businesses

Business Plan – Document with important information about your business

  • Apply for bank loans

  • Plan business to reduce risk of failure

Methods and problems of measuring business size

  •  Number of employees

  • Value of output

  • Value of sales

  • Value of capital employed

Business growth

  • Increased chances of higher profit
  • Better status and prestige of the owners and employees
  • Lower average cost(more negotiating power)
  • Increased control of the market

Internal Growth – Business grows by itself

External Growth – Take-over or merger with another business.

Horizontal integration – Firms in the same industry at the same stage of production merges.

Vertical integration – Business expands by merging with another business in another stage of production.

Why some businesses fail

  • Poor management

  • Failure to plan for change

  • Poor financial management

  • Over expansion

  • Start-up risk

Unlimited Liability – Owners are held liable for the business. If the business goes in debt, the owner needs to pay back with their own money.

Limited Liability – Opposite of Unlimited liability, If a business fails, the owners only lose what they invested

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Main forms of business organisations

Sole Trader – Owned and operated by one person.


  • Cheap and easy to start up

  • Full control of your own business


  • Unlimited Liability
  • Less money / difficult to expand

Partnership – Similar to a sole trader but there are 2 or more owners.


  •  2 Owners mean that more money can be invested

  • Less work since tasks can be done by 2 owners.


  • Unlimited Liability
  • There can be disagreement between the 2 owners.

Private limited company (LTD) – Owned by shareholders.


  • Limited Liability
  • Cheaper to set up than public limited companies


  • Slower to start up (many legal documents need to be signed)
  • Shares can only be sold to family and friends

Shareholders – Owners of a limited company, they buy shares which represent the percentage they own

Public limited company (PLC) – Similar to a private limited company but shares can be sold to the public.


  • Limited Liability

  • Shares can be sold to the general public

  • Company can grow and expand quickly


  • Complicated legal documents
  • Expensive to start up
  • Original owners of the business may lose control of the company

Annual General Meeting (AGM) – Meeting that must be held every year for shareholders

Franchisor – Company that owns the original business, Franchisors sell the franchise to a franchisee


  • Make money from selling the business’ name to franchisee

  • Quick growth of the brand


  • bad reputation will affect the whole franchise
  • Profit from franchised stores are kept by the franchisee

Franchisee – Someone who buys a franchise from the franchisor to use the brand name

Joint Ventures – 2 or more businesses start a new project together.


  • Costs can be shared amongst the companies

  • Knowledge and skills from more than one company


  • Profit is shared

  • Businesses may disagree with each other.


Poor internal communication leads to –

  • Workers don’t understand what they must do
  • Poor motivation
  • Wastage (e.g. 2 employees do the wrong task because of wrong instructions)

Poor external communication leads to –

  • Unhappy customers (leads to fewer sales)

  • Bad business reputation (lower sales)

  • Problems with suppliers/customers due to incorrect information (e.g. wrong supplies being delivered)


Job Analysis – A study of the tasks and activities to be carried out by the new employee

Job Specifications – The qualifications and qualities necessary to perform the job

Internal Recruitment


  • Saves time and money – Don’t need to spend money on advertising the job vacancy
  • Applicants ‘know’ the firm
  • Motivates other workers (chance for them to get promoted)


  • Applicants may not bring in new ideas
  • Promoting an employee may make other employees jealous and demotivated

External Recruitment


  • New ideas from new workers
  • More likely to hire someone who matches job specification


  • Expensive – need to advertise job
  • Demotivating for internal candidates



Induction training


  • Helps new employee settle in
  • Health and safety training may be required


  • Time consuming (delays the start of employee’s work)
  • Wages are paid but no work has been done by the employee
On the job training


  • Training is cheap
  • Work can be done while training


  • The trainer will not be getting work done.
  • Training won’t be effective if the trainer is bad

Organisation and management

Chain of Command – is how the power and authority is passed down from the top of the organisation (managers) to lower employees

Span of Control – The number of employees working directly under a manager.

Leadership styles

Autocratic – Leader is in charge and gives orders to employees

Democratic – Other employees involved in decision making

Laissez-Faire – “let it be” Leader sets objectives and employees makes decision and organise their own work.

Trade unions

Trade union – Group of workers who have joined together to ensure their interest are protected.

  • Improved conditions of employment

  • Improved work environment

  • Improved benefits

  • Improved job satisfaction

Motivating workers

People work for

  • Money
  • Social needs
  • Esteem needs
  • Job Satisfaction
  • Security

3 Ways to motivate employees

  • Financial rewards

  • Non-financial rewards

  • Job satisfaction

Abraham Maslow’s hierarchy of needs

Abraham Maslow’s theory states that the more levels of needs achieved by the worker = the higher motivated they will become. This also means that each level of motivation must be achieved before an employee can move to the next level of motivation.

F.W. Taylor’s theory

Employees are motivated by money.

More money = employees become more motivated

Federick Herzberg’s theory

There are 2 factors Hygiene & Motivation factors. Workers expect hygiene factors to be available to them otherwise they will become demotivated. Hygiene factors will not motivate the workers only motivation factors will make the employees work harder.

Wages (piece rate) – Workers paid depending on quantity of product produced

Salaries – Employees paid monthly, often used to pay office workers. Managers only need to calculate salaries once a month which uses less time.

Ways to improve job satisfaction
  • Job Rotation – Workers swap roles to do different tasks. This stops the employee from getting bored.
  • Job Enlargement – More extra tasks are given to the worker so they have a variety of things to do. However, these tasks should not be more difficult. e.g. supermarket cashier now adds price label on items.
  • Job Enrichment – Adding tasks that require more skill and responsibility. e.g. receptionist employed to greet clients now deal with telephone enquiries.


Reasons to enter a new market

    • Low trade barriers
    • Home markets are saturated
    • Other countries developing

Problems when entering a new market

  • High transport costs

  • Lack of knowledge

  • Trade barriers

  • Change in exchange rates

Marketing mix – The four P’s

  • Product
  • Place
  • Price
  • Promotion


Informative advertising – Give audience detailed information about the product

Persuasive advertising – Tries to persuade audience that they need the product

Sales promotion – Special deals to attract customers short term.

Distribution channels

Business Revision notes

Pricing strategies

  • Cost plus pricing
  • Competitive pricing
  • Penetration pricing
  • Promotional pricing

Product life cycle
Business Revision notes
Extending the product life cycle
  • Introduce new variations of the original product

  • Sell the product into new markets (e.g. distribute to other countries)

  • Increase and create new advertising campaigns

  • Lower the price

  • Make changes to the product

Market research

Ways of collecting primary research

  • Questionnaires
  • Focus groups
  • Interviews
  • Observation

Examples of where secondary research

  • Departmental records

  • Newspaper

  • Internet

  • Reports

  • Statistics

Mass marketing – Aimed at the whole market

Niche Marketing – Tailoring product to a customer (small specialised market)


Examples of fixed cost – rents such as office space or land, insurance and employee salaries

Examples of variable cost – Materials used to produce product, wages of production workers

Average cost per product = Total cost / Number of products produced

Business Revision notes

Economies of scale – Factors that lead to a reduction in average cost as a business increase in size.

  • Purchasing economies – Large firms able to negotiate cheaper prices for raw materials (e.g. Coca-Cola buying large bulks of sugar from supplier )

  • Financial economies – Large firms able to negotiate cheaper finance deals (e.g. lower bank loans because banks view large businesses as less risky)

  • Managerial economies – Large businesses can afford to hire specialists to work for them. This increases efficiency.

  • Technical economies – Use of specialist machinery to produce large quantities of products. (Small businesses cannot afford this)

  • Marketing economies – 1. Buying own vehicle to distribute product 2. Advertising costs can be spread over a large number of products.


factors for a Manufacturing business

  • Production methods

  • Close to raw materials

  • Government influence

  • Transport

  • Power

factors for a Retail business

  • Shoppers

  • Security/crime in the area

  • Nearby shops

  • Parking facilities must be close by

Clustering – Competitors in the same area attract consumers

Quality production

Quality control – Checking product quality at the end of the production process.

  • Gives competitive advantage

  • Encourages return purchases

  • Provides customers with information and builds consumer confidence in the brand

  • Reduces costs incurred in solving past sales problem (Customer refunds etc..)

  • Helps improve efficiency

Advantages of QC

  • Faults are found before product is sold to customers

  • Less training for the worker is required (compared to quality assurance)

Disadvantages of QC

  • Hiring employee to check product costs money
  • QC does not explain how fault occurred and can happen again.
  • Fixing defected products cost money

Total Quality Management – Continuous improvement of products and processes by focusing on quality at each stage of production

Production of goods

Business Revision notes

Lean Production – Term for techniques used by businesses to cut down waste and increase efficiency.

Kaizen – Kaizen means continuous improvement by eliminating waste.

Methods of production

  • Job production

  • Batch production

  • Flow production


Profit = Sales Revenue – Costs

Profit can be increased by
  • Reducing costs
  • Increasing sales revenue
  • Revenue – (Selling price x Quantity sold)

  • Gross profit – (Sales revenue – cost of sales)

  • Cost of sales – (aka Costs of goods sold) is the cost involved in selling a product – More details here

  • Net profit (Gross profit – expenses) This is the actual profit after subtracting the business’ operating expenses such as employee salaries & wages, taxes etc.

  • Retained profit (Profit kept by the business for its own use)

Cash flow – money going into and out of a business over a period of time

Cash flow cycle

Cash is needed by the business for operation -> Products are produced -> Products sold -> Customers pay cash to the business -> REPEAT


Net cash flow = Cash inflow – Cash outflow

Working capital – Capital (money) available for a business to pay for day to day operations

Working capital = current assets – current liabilities


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