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Title: Business IGSCE Pearson Edexcel
Description: A lot of time spent, very useful and detailed
Description: A lot of time spent, very useful and detailed
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Tema 1: What is business activity?
Business - is an organisation that provides goods and services
...
g
...
Services - is a non-physical product
...
g
...
Organisation - group that has formed for a particular purpose
...
Features of business activity:
-
Business activity produces an output
...
Resources are used
...
Businesses aim to make a profit
...
Producer goods: goods and services produced by one business for another
...
Needs: basic requirements for human survival (water, food, shelter…)
Wants: people’s desires for goods and services
...
Unfortunately, the resources available to businesses are finite
...
Economists say such resources are scarce
...
The purpose of business activity:
-
-
-
Private enterprise: Most businesses are owned privately by individual or groups of
individuals
...
The objective of a private
enterprise is often to make money – a profit for the owners
...
Organisations such as charities, pressure groups… exist for reasons other than
profit
...
These are called public sector organisations
...
Business stakeholders:
Stakeholder: an individual or group with an interest in the operation of a business
...
This is also a stakeholder though it’s
interested in the business
...
Often called entrepreneurs
Customers: buy goods and services, want good quality products at a fair
price
...
Want
good working conditions, fair pay, benefits…
Managers: help to run most of the business
Financiers: invest money in the business
Suppliers: bring / deliver something to you
Local community: businesses are likely to have an impact on the local
community
...
Entrepreneur: person who takes risks and sets up businesses; individual
who organises the other factors of production and risks their own money in
a business venture
...
Objectives help to motivate
people
Without objectives owners might not have the motivation needed to keep
the business going
...
It is easier to assess the performance of a business if objectives are set
...
(profits
shared between the shareholders of a company)
Profit satisficing: making enough profit to satisfy the needs of the business
owner(s)
Survival:
-
All business will consider survival as important, however from time to time
survival may be the most important objective
...
Profit:
-
Most businesses aim to make a profit because their owners want a financial
return
...
Sales:
-
Some owners want their business to grow their sales
...
May enjoy lower costs
...
This means they
might be able to do this if they win customers from competitors
...
They might aim
to make enough profit to give them financial security (profit satisficing)
...
(a business being
able to afford to pay all of it’s costs and have enough money left to survive)
Social Objectives:
-
In the public sector, where the government owns businesses, social
objectives are important
...
Personal satisfaction:
-
-
Many businesses owners set up a business because they think they will be
happier and feel more satisfied in their work environment than when
working for an employer
...
Challenge:
-Some people are motivated by challenges and starting a business can be very
challenging
...
- These people need to be committed, hard workers and multi-skilled
...
They want to be in control
...
Why might Objectives change?
Market conditions:
- Business operate in dynamic markets
...
- E
...
A new entrant may appear in the market, a rival may introduce a new product
or the economy may start to decline
...
E
...
Auto motion might be introduced
...
Periods of sustained profitability may be interrupted by less successful
periods
...
Legislation:
-
New legislation might have an impact on the objectives of a business
...
This might be a
reaction to new environmental, employment or consumer legislation
...
g
...
Internal reasons:
-
Sometimes a business might change its objectives for internal reasons
...
g
...
The changing business environment:
This means that they might be affected by external factors likely to be change over time
...
Lo de ‘Why might objectives change?’ pero resumido, como hicimos en clase:
Market conditions
...
Technology: being more productive using robots
...
Legislation: changing in the laws
...
g
...
(limited liability)
Features:
Unincorporated:
-
Everything carried out in the name of the owner
...
Sole traders:
-
Sole trader/Sole proprietor: business owned by a single person
...
-
No legal requirements (easier to set up)
...
Easiest/most common way to set up a business
...
Flexibility – e
...
can adapt to change
quickly
...
Partnership:
Disadvantages
Have unlimited liability
May struggle to raise finance – considered
too risky by those who lend money
Independence may be too much of a
responsibility
...
Partnership: business owned by between 2 and 20 people
...
Deed of partnership: (What includes)
-
How much capital each partner will contribute
...
How much control each partner has
...
How profits (and losses) will be shared
...
(owners of the franchises are called
franchisors)
Things that the franchisor offers the franchisee:
-
Materials, equipment and support services that are needed in order to run
a business
A licence to trade under the recognised brand name of the franchisor
A start-up package
Franchisee has to pay certain fees:
-
One-off-start-up fee
An ongoing fee
Contribution to market costs
Franchisors may make a profit on some of the materials, equipment and
merchandise supplied to franchises
...
Cooperative: company, factory or organisation in which all the people
working there own an equal share of it
Consumer cooperative: cooperative that is owned by its customers
Retail cooperative: cooperative of retail members, who often work together
to assert their purchasing power
Worker cooperative: cooperative that is owned by its employees
...
Features of social enterprises:
-
Have a clear social and/or environmental mission
...
Reinvest most of their profits
Are accountable and transparent
Are majority controlled in the interests of the social mission
Tema 4: Limited companies and multinationals
...
Limited liability: shareholders are not legally responsible for the debts of a company
Chairperson: someone who is in charge of a meeting or directs the work of a organisation
...
Important documents that must be sent to the Registrar of Companies:
-
Memorandum of association: sets out the constitution and gives detail
about the company
...
If these are acceptable, the business will get a certificate of incorporation
...
Their business name ends in limited or LTD
Shares in private limited companies cannot be traded on the stock market
They are often family businesses owned by family members or close
friends
The directors of these firms tend to be shareholders
Advantages
Shareholders have limited liability
More capital can be raised
Control cannot be lost outsiders
Disadvantages
Costs money and time to set up
Financial information has to be made
public
Profits are shared between more members
Public limited company (PLC):
Features:
-
Tend to be larger than LTD companies
...
Can be expensive because:
- Company needs lawyers to ensure the prospect is legally correct
- Prospectus has to be printed and circulated
- A bank may be paid to process share applications
- Advertising and administrative expenses
- The PLC must have a minimum of 50000 euros share capital
...
-
Huge assets
Powerful advertising and market capability
Highly qualified and experienced professional executives and managers
Highly advanced and up-to-date technology
Highly influential both economically and politically
Very efficient since they can exploit huge economies of scale
Ownership and control is centred in the host country
...
Features of public corporations:
-
-
State owned - the government own public corporations
Created by law - created by an act of parliament
Incorporation - are incorporated (have a separate legal identity)
State-funded - the government provides the capital needed (tax)
Provide public services - do not aim to make a profit, their main objective is
to provide a public service
Public accountability - they have to produce annual reports which are
submitted to the government minister in charge of the particular
corporation
The nature and number of public corporations around the world can vary in each
country
...
Reasons for the public ownership of a business:
-
Avoid wasteful duplication
Save jobs
Maintain control of strategic industries
Fill the gaps left by the private sector
Serve unprofitable regions
Vocabulary:
Natural monopoly: market where it is more efficient to have just one organisation meeting
total market demand
...
Inefficiency - public corporations are often criticised for their low
productivity and efficiency
...
Difficult to control - they are too large
...
Factors affecting the appropriateness of different forms of ownerships:
-
Growth - many businesses start small and gradually get bigger
Size - many small businesses are sole traders or partnerships
The need for finance - finance is the main reason that owners change the
legal status of their business
...
May not want the responsibility
associated with other objectives such as growth
...
Therefore, growth might be limited
and other objectives are more important
...
Their aim is to get bigger and bigger so
they can dominate global markets
...
Primary sector:
Primary sector: production involving the extraction of raw materials from the earth
...
Assembly plant: factory where parts are put together to make a finished product
...
These goods are
sold to other businesses and used as inputs for the production of final goods, which
are then sold to consumers
...
g
...
Tertiary sector:
Tertiary sector: production of services in the economy
...
This
means that they rely on each other
...
g
...
Changes in sectors:
De-industrialisation: decline in manufacturing
...
Different
sectors grow and decline over time
...
Why has manufacturing declined in developed countries while services have
grown?
-
-
People may prefer to spend more of their income on services than
manufactured goods
...
There is fierce competition in the production of manufactured goods in
developing countries such as India, China, Brazil
...
Since the public sector
mainly provides services, this adds to the growth of the tertiary sector
...
Tema 8: Decisions on location
Proximity to market, labour, materials and competitors:
Proximity to the market:
-
Businesses that make, large or heavy products may be located close to their
customers to keep transport costs down
...
This is because many services are sold direct to consumers
...
Large companies may also consider locating in countries
where labour is very cheap
...
Proximity to materials:
-
Businesses that use large amounts of raw materials that are difficult to
transport may choose to locate their premises very close to their sources
...
Set up in areas where:
-
Premises are cheap – often located away from expensive residential areas
...
Greenfield sites: previously undeveloped areas of land, usually on the outskirts of towns
and cities
...
E
...
An entrepreneur opening a hairdresser may avoid locations
where such businesses already exist
...
This might
be important in industries where comparison shopping is popular
...
The nature of business activity:
-
-
Services: when choosing location, businesses have to take into account the
ease of access and parking facilities
...
Manufacturing and processing: location chosen by manufacturers may
vary because different types of manufacturing have different needs
Agriculture: different farmers need different type of land
The impact of the internet on location decisions:
E-commerce is any transaction that takes place through the internet
...
This is common in
retail industries such as clothing shops
...
The main benefits of e-commerce are:
-
lower costs
flexible working hours
access to a much larger market of potential customers
ability to be open 24 hours a day, seven days a week
relatively low-price marketing and promotion
Influence of legal controls and trade blocs on location:
Legal controls:
Governments may try to influence location decisions for several reasons:
-
to avoid congestion where there is already enough or too much
development
...
To encourage manufacturers to locate where unemployment is high
Often use financial incentives to influence business choice of location
...
A business might decide to locate inside a trade bloc to avoid trade barriers such as tariffs
...
Vocabulary:
-
Emerging economies: rapidly growing economies
...
Saturate (market): to offer so much of a product for sale that there is more
than people want to buy
...
Hostile takeover: takeover that the company being taken over does not
want or agree to
...
Concept of Globalisation:
-
Many of today’s markets are global
...
Globalisation: growing integration of the world’s economies
...
there are no
government laws to prevent firms from selling goods in overseas markets
...
This has resulted
increasingly multicultural societies where people from many different nations live
and work in the same city
-
High levels of interdependence between nations
...
Capital can flow freely between different countries
...
Many firms want to sell abroad, perhaps because domestic markets have
become saturated
...
Also a lot
of trade barriers have been removed
...
Countries cannot trade if the government keeps international borders
close
...
International trade will be very limited if governments put up trade
barriers
...
Opportunities of globalisation for businesses:
-
Access to larger markets: growth opportunities for businesses
...
Lower costs: this is because as firms grow they can exploit economies of
sales
...
Reduced Taxation
...
As
more companies around the world try to sell their goods and services in an
increasing number of countries, some business will have survival
threatened
...
Increased risk of external shocks-interdependence can pose a threat to
business
...
Vocabulary:
-
-
Commodities: products that are bought and sold
Patents: legal documents giving a person or company the right to make or
sell a new invention, product, or method of doing something and stating
that no other person or company is allowed to do this
...
Human capital: people and their skills
...
Currency reserves: money in foreign currency held by a country and used
to support its own currency and to pay for imports and foreign debts
...
The importance and growth of multinationals:
-
Multinational contribute 10%of the world gdp and 66% of the wold’s
economies
...
The role played by multinationals in the global economy is likely to remain
important well into the future
...
This is because
they can exploit economies of scale
Marketing some firms have become multinationals by relying in effective
marketing
Technical and financial superiority: most multinationals have developed
into large businesses over a period of time enjoying superiority
...
Can
also afford to invest heavily in research and development
...
Can boost their sales
revenues by selling to global markets
...
Lower costs: since multinationals are larger companies they can exploit
economies of scale and enjoy lower costs
...
May also reduce transport
costs
...
Large companies with strong brand names are recognisable and may
become household names
...
Lower taxes: basing their head offices in countries were taxes are lower
...
Multinationals create new jobs in developing
countries
...
Increase tax revenue
in the country to improve government services
Increase exports output of a country- helps countries to increase their
foreign currency reserves
...
Improvement in the quality of human capital: provide training and work
experience for their workers
...
Drawback of multinationals to a country economy:
-
Environmental damage – environmentalists are suspicious of
multinationals because they may cause environmental damage
...
May encourage developing countries to rely on producing primary
products
Pay low wages, working conditions are poor
Taxes paid to host nations are often minimal
Repatriation of profits: profits made by multinationals abroad are often
repatriated, this means that profit is returned were multinational office is
based lack of accountability- are so large and powerful that they lack of
accountability, may be able to evade de law in countries were the
government is weak and corrupt
...
International trade:
-
International trade benefits the world
...
Allows countries to obtain goods that can be bought more cheaply from
overseas
...
-
Provides opportunities for countries to sell off surplus commodities
...
-
bought from overseas
...
Invisible trade: trade in services
...
What is an exchange rate?
-
Most countries in the world do not use the same currency
...
When countries use different currencies, transactions between people and
firms are affected
...
The impact of changes in the exchange rates on importers and exporters:
-
exchange rate falls, depreciation in the exchange rate
exchange rate rises, appreciation in the exchange rate
If your currency appreciates is more likely to import than to export and if
currency depreciates is more likely to export than to import
...
Exchange rate falls hardly for a long period of time;
this means that all exporters in the country can sell their goods more cheaply
abroad
lower exchange rates prices rise
constant vary of exchange rates causes uncertainty
Business 12: Government objectives and policies
...
Social security payments: money taken by the government from people’s
wages to pay for the system of payments to people who are unemployed or
ill
...
Barriers to entry: restrictions that mean it is difficult for new firms to enter
a market
...
Interest: Price of borrowed money
Monetary policy: using changes in interest rates and the money supply to
manage the economy
Government spending:
-
One of the rules for most governments is to provide a range of public
services
...
Government spending levels will influence businesses
...
However, it often
depends where the money is spent
...
The money raised by taxation is used by a government to help fund its
spending on public services
...
Some taxes are direct, which means they are charged in income which
include:
Corporation tax which is pay on company profits (business) and income
tax: paid by people
V
...
t: indirect tax, paid by buying goods or services
income tax: paid by people
If income tax were lowered, there would be more spending in the economy
...
In some countries
income tax rates may be cut to help the low paid
Business may response to higher corporation tax by cutting investment or
reducing dividends
Constraints on public spending:
-
-
In some countries governments have tried to constrain levels in public spending
...
The effects on business of such constrains:
Public sector organisations that supply services directly may get their funding cut
...
Private sector business that rely on public sector contracts for part, or all, of their
business will be hit
...
In some countries government
payments, such as pensions and social security payments have been frozen or cut
...
(schools, hospitals, roads…)
These projects can be very expensive, often costing millions or even billions
of dollars
...
This is because private sector businesses are likely to get most
of the work
...
This will boost demand for all
types of businesses
...
Some might go further and exploit vulnerable stakeholders
...
Consumer protection:
-
Consumers want to buy Good quality products at a fair Price and received
customer service
...
Competition policy:
-
Government should try to promote competition
...
Many countries have laws that help
to encourage competition
...
Environmental legislation:
-
Business activity can have a negative impact on the environment
One approach used by many governments is to pass new laws to minimise
the damage done by business to the environment
If business fail to comply the environmental law they may be fined or
forced to close until the problem is solved
Trade policy:
-
Despite the benefits of international trade , governments sometimes
believe that it is in the nation’s interest to restrict trade
...
- Governments can use trade barriers to restrict trade
...
-
Governments can also influence businesses by forming a trade bloc
...
Effects of interest rates on businesses:
●
●
●
●
●
●
●
Interest is the cost of borrowing money and the reward to savers
Interest is usually controlled by the authorities and can therefore change
...
So therefore reduce profits
The purchase of capital goods funded by borrowing is discouraged because it is
more expensive
...
This is
because consumers are less willing to borrow money to fund spending
...
This is because most people’s mortgage payments rise
...
Savers will be hit if interest is low
...
Tema 13: External factors
Vocabulary:
-
Urbanisation:Urbanisation refers to the concentration of human
populations into discrete areas
...
-
Capital- intensive: refers to business processes or industries that require
large amounts of investment to produce a good or service and thus have a
high percentage of fixed assets, such as property, plant, and equipment
The Nature of External factors:
-
Sometimes businesses have to deal with events and issues that are
completely beyond their control
...
These effects can be both positive and
negative
...
Increased consumer awareness
Changing demand patterns
Increased numbers of women workers
More part-time workers
Urbanisation: people live the countryside to move into town
Technology:
The development of new technology continues to have a huge impact on businesses
...
They are cheaper to employ than people because they can
work 24/7
...
Businesses usually welcome
developments in technology because they often provide new product opportunities or help
to improve inefficiency
-
Changes in technology can shorten the amount of time products can be
marketed for
...
The development of social media has helped to improve communication
between businesses and customers
...
Businesses are often blamed for pollution and congestion
...
Some of the greenhouse gases which contribute to global warming, come from
factories
...
Habitat destruction: some businesses development destroys wildlife habitats and spoils
the natural environment
...
Sustainable development: many governments promote the idea of suitable development
...
If
businesses take a sustainable approach they will also find it easier to comply with
regulations, reduce costs, improve their image and increase profits
...
The activities of pressure groups can also
play a role in influencing business activity
...
A new government might be elected which is very pro-business
...
If
revenues increase each year, most businesses would feel that they were
making a success of their venture
...
It is better for a business to have a larger market share, with a larger
market share a business may be able to dominate the market
...
Information would be needed about the size of the total market and the
revenues of the main suppliers in the market
...
Customer Satisfaction:
-
-
If customer service is good, a successful business will find that it has loyal
customers and a growing customer base
...
They might do this by having a
formal complaints procedure or comments on social media
...
Profit:
-
Most private sector businesses aim to make a profit
...
The amount of profit often depends on its size
...
Profit can only be used to measure success if the objective of the business is
to maximise profit
...
A growing business is likely to be considered successful, if growth is
sustained over a period of time
...
Overtrading: taking on more work than a business can afford to fund
effectively
...
Small
Less than 10
million euros
...
employees
Less than 10
Less than 50
Capital
employed
Less than 2
million euros
Less than 10
million euros
Medium-sized
10 million
euros to 50
million euros
50 to 249
10 million
euros to 43
million euros
Large
Greater than 50
million euros
Greater than
249
Greater than 43
million euros
...
Over time shareholders would want both dividends payments and share
prices to rise
...
Employee satisfaction:
-
Employees depend on businesses for their livelihood
...
-
Employees want the business to be successful because if a business is
growing and profitable, they are likely to get higher wages
...
Employees might also need training or things like good working conditions,
opportunities to interact with employees or safety at work
...
This makes it easier to
measure success
...
Targets can be adjusted to take in account the current circumstances of the
business
...
- Many businesses fail because they run out of cash, even when they are potentially
profitable
...
- Effective financial planning in business is crucial
...
-Overtrading : Young and rapidly growing businesses are particularly at risk of
overtrading
...
-Investing too much in fixed assets: When businesses first start trading, funds are
limited
...
- Allowing too much credit : a great deal of business relies on credit
...
One of the
dangers is that businesses allow their customers too long for payment
...
- Over-borrowing: Businesses may borrow to finance growth
...
To avoid borrowing, a business may try to raise
more capital perhaps by selling shares
...
- Unexpected factors: Businesses need to prepare for any unforeseen expenditure
...
This might be caused by lack of experience or poor planning
...
Examples include changes in consumer taste, changes in
legislation or a downturn in the economy
...
is reduced and
conditions become worse
...
Lack of finance:
Both new and established businesses may fail if they cannot attract funding
...
They might be undercapitalised
...
One
industry that often struggles owing to a lack of finance is the restaurant industry
...
This means they might be undercapitalised
...
Not competitive:
- Some businesses fail because they are unable to compete effectively in the
market
...
Small businesses collapse because they are overrun by larger
competitors
...
Ineffective cost control:
- In some cases, businesses cannot keep their costs down
...
This might result in a loss of trade
to low-cost competitors
...
- They may be wasteful
- It is possible that a business is paying too much for some if its resources
-Might not be minimising labour costs
- Cost might also rise owing to external factors
...
- A business might use inappropriate pricing strategies, which could mean that
prices are too high or too low
-A business might invest too heavily in overpriced or inappropriate marketing
campaigns
-Inappropriate marketing strategy
...
- Running a business is very challenging and requires many skills
...
Poor Leadership:
- A business might lose its competitive edge in the market because the leader
makes a mistake
...
Failure to innovate:
- Some businesses collapse because they fail to innovate (do not change with the
times)
...
As a result, they lose out to their more innovative rivals
...
(Many people like
innovative and new products)
...
Tema 16: The importance of good communication in business
...
Example of how might communication work:
How does communication take place:
-
Inside a business, messages can be passed vertically and horizontally
...
Communication Channels: routes along which information might travel in a
business
...
Is important because:
-
Subordinates look to their managers for leadership and guidance
...
It allows managers to command, to control and
organise
...
Is helpful because:
-
Helps managers to understand the views and needs of subordinates
...
Helps staff to feel that they are valued
...
Horizontal communication:
-
Horizontal communication: exchange of information between parties on the same
level in an organisation’s hierarchy
...
Ej: a board meeting where directors are discussing a possible merger
...
Ej: a statement from a credit card
...
Formal groups are those set up by the business
Informal communication:
-
Use of non-approved channels when communicating
...
This means that
unofficial information is passed on through gossip and rumours
...
The importance of good communication in business:
-
If internal communication is poor, problems can arise
...
Poor communication can lead to mistakes, wasted resources and confusion
...
Poor external communication can make the business look foolish and may cost it
money
...
Ej: an interview
...
Disadvantages
Allows immediate feedback
Negative body language may create a
barrier
Encourages cooperation
A record of the message may not be
kept
Allows new ideas to be generated
Non-relevant
included
Saves time
Some people may not be listening
information
may
be
Limits to the number reached
Written Communication:
-
Letters: They are flexible because they can be sent to a variety of different people
...
Memorandums (like a post-it note): used for internal communication only
...
Forms: used to communicate routine information
...
Electronic Communication:
´- Possible to deliver messages instantly, all over the world and to a number of people at
the same time
...
- Mobile Phones
...
- Intranets: where all the computers in a particular department or organisation are
linked together
...
- Videoconferencing: Allows people in different locations to have face-to-face
meetings
...
- Electronic notice boards
...
Lack of Clarity: If a message isn’t clear, it may be misunderstood or ignored
...
Technological breakdown: If technology is faulty, communication may become
unclear or break down
...
Poor communication skills
...
Distractions: Communication may break down if there are distractions in the
communication process
...
This is negative and encourages a mentality in
which staff become isolated and fail to share information with colleagues
...
Using the wrong medium: if the sender uses an inappropriate medium, an
important message may be missed
...
The problems of ineffective communications in business:
-
Can result in expensive problems
...
Ineffective external communications can damage relations with customers and
suppliers
...
How can barriers to communication be removed?
-
Recruitment
...
Written Communication
...
Chain of command
...
Culture change
Culture of business: how things go or how things are done in the business
Tema 18: Recruitment and selection
Types of employment:
Full-time employment:
-
Expected to work the full working day-usually five days
...
Full- time workers may be entitled to certain benefits and rights in addition to pay,
including health insurance or overtime pay
...
Helpful arrangement for the business because it gives them more flexibility
...
Suit certain employees
...
Might suit employees who want to reduce their work hours, to provide more
leisure or family time
...
For a business this means that it has the ideas and enthusiasm of two people rather
than one
...
Casual Employment:
-
Workers do not get any guarantee of work from their employer
...
This provides a great deal of flexibility for businesses but casual workers may lack
the commitment his colleagues have
...
The work is regular and full time but short lived
...
Temporary Employment:
-
For a short period of time to cover for absent workers
...
Temporary work might be taken by job seekers to earn some income while they
look for a permanent post
...
A business may need staff because:
-
The business is expanding and more labour is needed
...
Positions have become vacant owing to promotion
...
Stages in the recruitment process:
1
...
3
...
5
...
7
...
Do we need a new employee?
Identify the type and the number of staff needed
...
Advertise using appropriate media
...
Carry out interviews
...
Provide feedback for unsuccessful applicants
...
Person specification: personal profile of the type of person needed to do a
particular job
...
Curriculum Vitae: document used by a job seeker that lists personal details,
qualifications, work experience, referees and other details
...
Induction: Introduction of someone into a new job, company, or official position
...
If a business is replacing someone who is leaving, the job description may be the
same
...
Might also use to see how well an employee has performed in relation to what is
expected of them
...
It is used to “screen” applicants when sorting through the applications
...
It is a standard form and every applicant will be expected to submit a list of
information on the form
...
Should include:
-
Full name and address and other contact details
...
-
Details of education
Employment history
Relevant experiences and qualifications
...
Hobbies and interests
Any health issues
...
Curriculum Vitae:
-
Similar to an application form
...
Done by a job seeker, therefore it is personalised
...
Have a more professional look and can be sent to different employers
...
Some Advantages:
-
It is cheaper because it saves on advertising
...
Staff may be more motivated if they know there is a chance of promotion
...
-
External recruitment: appointing workers from outside the business
...
A new person may be very talented and have some fresh ideas, which could help
the business become more competitive
...
Brief details of the job description
...
Salary and other benefits
...
A business has to choose which media to use when placing the advert
...
Shortlisting:
-
Select a small group of candidates suitable for interviewing (shortlisting)
...
-
Can be a time-consuming task
...
Interviewing:
-
This is where interviewers can find out more about the applicants by asking direct
questions face to face
...
Help clarify information on the application form
...
Challenge candidates by asking searching questions such as how they might deal
with a specific work-related problem
...
Without such protection, some businesses would exploit their workers
...
Discriminate against certain groups or dismiss them unfairly
...
If a business chooses a person because they are more skilled and better qualified
than another, this would be legal
...
Gender:
-
-
Gender discrimination usually, though not exclusively occurs when a woman in the
workplace does not receive equal treatment because she is female
...
Legislation like this is likely to have an impact on businesses:
Advertisements for jobs must not specify a particular gender
...
Both genders must have
equal opportunities in appointments
...
Promotion must not be made on the basis of gender and people cannot be
dismissed because they are female or male
...
Businesses will have to take more care when designing internal documents
...
Race and Religion:
-
Businesses must ensure that they do not discriminate on grounds of colour, race,
ethnic religion or nationality
...
The use of selection tests must be monitored to ensure that their styles do not
discriminate against people from minority backgrounds
...
Businesses cannot refuse to employ people from particular ethnic or religious
groups
...
Disability:
-
Many countries now have legislation to help improve the rights of people with
disabilities at work
...
Improve access to the workplace by widening doors and providing ramps for
wheelchairs
...
Alter equipment to accommodate those with sight or hearing difficulties
...
Sexual preference:
-
Laws have been passed to protect their rights
...
Businesses must take care to avoid sexual preference discrimination in
recruitment, pay, terms and conditions of employment, promotion and training
opportunities and dismissal
...
Many countries do not have specific age discrimination legislation but protection is
still provided under laws that make discrimination of all types illegal
...
Businesses should take measures to prevent older workers from being harassed in
the workplace
...
In interviews, assumptions cannot be made about the ages of candidates or their
suitability for a job on grounds of age
...
This might disadvantage younger applicants
...
In some countries governments have introduced a legal minimum wage
...
Workers will be entitled to have arrears of wages repaid at current rates
...
Why set legal minimum wages?
-
To benefit disadvantaged workers
...
To help businesses: workers will be more motivated
...
-
One of the advantages of minimum wages is that low paid people receive more
money
...
The extra money low paid workers receive comes from firms who have to
pay the higher wages
...
Effects of minimum wage laws on businesses:
-
If a business employs very large numbers of people on wages that are below the
minimum wage, clearly their wage bill will rise if a minimum wage is introduced
...
Most governments increase the minimum wage every year, therefore businesses
employing people on the minimum wage will have to match this increase
...
Benefits of minimum wages to businesses:
-
-
People on low pay may be better motivated and more productive when they
receive a pay rise resulting from the introduction of a minimum wage
...
This will help drive up sales and profits for
some businesses
...
This might be because low paid
workers, who often have to have more than one job to survive, will be more
committed to a single employer
...
The importance of training:
Allows employees:
-
To acquire more skills and improve existing ones
...
Increase productivity
Be better leaders
...
Induction training:
Induction training: training given to new employees when they first start a job
...
If a firm fails to provide induction training, staff may feel anxious and this will lead
to poor productivity
...
Hours of training depend on the business
...
Health and safety training
...
Introduction to job and direct work colleagues and senior staff
Company history, aims and objectives
...
Watching another worker:
-
A new recruit watching and copying the actions of an experienced and competent
employee
...
The new recruit might learn things that the other member of staff does wrong
...
Mentoring:
-
Where people with a lot of experience and knowledge advise and help other people
at work or young people preparing for work
...
Job rotation:
-
Where employees alternate between different jobs during the course of their
employment
...
On-the-job training:
Advantages
Output is being produced
...
Cheaper than other forms of training
...
Disadvantages:
Output may be lost if workers make
mistakes and through the time diverted to
showing the new recruit how to do things
...
Staff may get frustrated if they are
“unpaid” trainers
...
Off-the-job training:
-
Training that takes place away from the work area
...
Advantages
Output is not affected if mistakes are done
...
Training could take place outside work
hours if necessary
...
Disadvantages
No output because employees do not
contribute to work
...
Some aspects of work cannot be taught
off-the-job
...
Training in health and safety:
-
In many occupations the workplace can be a dangerous environment
...
This legislation exists to protect people at work
...
The importance of a hygienic environment
...
The protection needed from bullying, violence… in the workplace
...
Improving labour flexibility
Improving job satisfaction and motivation
...
Training for promotion
...
Learning by doing
Loss of output
Employees leaving
More info pg 172
...
Why is employee motivation important in business?
-
If a business has a well-motivated workforce it will perform better
...
Easier to attract employees:
Easier to retain employees:
Higher labour productivity:
How can businesses influence motivation?
-
Because they have the opportunity to provide for a number of human needs
...
A number of theories have been developed that suggest how businesses can
motivate workers by satisfying human needs
...
He called these motivators
...
He called these
hygiene factors
...
-
Hygiene factors would not motivate workers, but if these were insufficient,
workers would develop poor motivation
...
Motivators
Achieving aims
Chance of promotion
Responsibility
Interesting work
Recognition
Personal development
Hygiene factors
pay
Working conditions
Job security
Quality of supervision
Staff relationships
Company policy
...
Hygiene factors (Herzberg’s): things at work that result in dissatisfaction
...
Job enrichment: making a job more challenging and interesting
...
Maslow’s hierarchy of needs:
-
-
Abraham Maslow recognised, in 1943, the needs of employees but arranged them
into a hierarchy showing that some needs are more important than others
...
By going
to work, people can earn money to buy food, clothes and safe shelter
...
They also need routine and familiarity
...
Work can satisfy social
needs, because people often work with others (develop friendships and
relationships)
...
Self-actualisation: develop skills, develop as people and people also want to reach
their potential
...
If lower needs are not met, workers cannot be motivated if a business tries to meet
higher needs
...
Workers
can only be motivated by achieving the next set of needs in the hierarchy
...
Taylor's theory of scientific management:
-
It was one of the first motivational theories to emerge (1911)
Taylor said that workers were motivated by money
...
Tema 22: Methods of motivation at work
Remuneration:
Remuneration: money paid to employees for their work or services
...
Payment system based on the amount of time employees spend at work
...
Net pay: take home pay, that is, pay after deductions, such as income tax pension
contributions or student loan repayments
...
- Workers may be paid overtime
...
Wages and salary:
-
Salary: pay, usually to non-manual workers expressed as a yearly figure but paid
monthly
...
If you work as a wage you will get paid extra money if you work more hours butIf you work for a salary this won’t happen
...
Piece rates:
-
Piece rate: payment system where workers receive an amount of money for each
unit produced
...
Workers who are lazy or slow will not earn as much as those who are disciplined
and productive
...
Problems:
-
Piece rates cannot be used if work cannot be measured
...
They may take short cuts
and make mistakes
...
Performance-related pay:
-
Payment system designed for non-manual workers where pay increases are given if
performance targets are met
...
Works best if businesses use an appraisal system to evaluate staff performance
...
Problems:
-
Some workers feel that it is unfair because appraisers may be inconsistent
...
The financial incentives may not be high enough to motivate workers to improve
their performance
...
Some workers may blame other factors if targets are missed
...
Bonuses can also be paid to groups of workers
...
This means that
money is only paid if it has been earned
...
Commission:
-
Payment based on the value of sales, usually a percentage of sales made
...
A salesperson may be paid entirely on the basis of their sales record
...
Promotion:
-
Many people want to develop a career at work
...
The chance of promotion at work will help to motivate workers, because
promotion nearly always comes with higher pay
...
According to Herzberg, the chance of promotion is a motivator
...
Some examples: subsidised meals or free counselling services
...
Employees may also
pay less tax if they take fringe benefits instead of cash
...
Some benefits help to attract and retain better-qualified employees for a business
...
This
might help to improve worker satisfaction, such as free private health insurance…
Some fringe benefits are performance related
...
Non-financial rewards:
-
Some people are not motivated by money
...
Job rotation:
-
Allow employees to change jobs from time to time
...
Job rotation should help motivate workers and provide a business with more
flexibility
...
Specialisation may be lost
...
Tasks motivate
workers
...
Tasks don’t motivate workers
...
Workers are given the authority to make more choices and decisions about the way
they work
...
It might also give employees more self-confidence and is a way of recognising their
achievements
...
Some workers may respond negatively to autonomy, especially if they do not
receive extra pay
...
Tema 23: Organisation structure and employees
Organisational charts:
-
Formal organisation: internal structure of a business as shown by an organisation
chart
...
What does an organisation chart show?
-
How the business is split into functions or departments
...
To whom people are accountable
...
The relationship between different positions in the business
...
Together with the chairperson, they form the board of directors
...
Have authority over the managers in the layer below them
...
Overall role is to achieve the objectives of the owners
...
There are several managers in each department
...
They have authority over operatives and general workers
...
Involved in the production process
...
Shown near the bottom of the hierarchy
...
General staff:
-
With the training they can perform a variety of tasks and gain promotion to other
positions
...
Professional Staff:
-
Are skilled and highly trained
...
Features of organisational structures:
Chain of command:
-
Route through which orders are passed down in the hierarchy
...
If the chain of command is too long: messages may get lost or confused as they pass
up and down the chain
...
Span of control:
-
Number of people a person is directly responsible for in a business
...
Someone with a fewer span of control, controls fewer subordinates
...
Flat and Hierarchical (tall) structure:
-
A flat structure means there are fewer layers in the hierarchy
...
With flat structure:
Communication is better because the chain of command is short
...
Control may be friendly and less formal because there is more direct contact
between the layers
...
Communication through the whole structure can be poor because there is a long
chain of command
...
Control tends to be more formal and less friendly because of all the layers in the
hierarchy
...
Sometimes delegation can motivate workers because they feel as if they were
trusted to carry out more difficult work
...
Centralisation and decentralisation:
-
If employees do not have any authority at all in a business, then decision making is
centralised
...
If you’re a manager it is good to have a combination of both systems
...
Centraliseddisadvantages
It brings less creativity
and fewer ideas
...
Employees may be
demotivated without
any authority
...
Senior management
has complete control
over resources
...
Decentralisedadvantages
Workers have
autonomy and may be
better motivated
...
It takes pressure off
senior managers by
reducing their
workload
...
Decentraliseddisadvantages
Some employees may
not have the ability
to make decisions
...
Senior managers may
lose control of
resources
...
Organisational charts and growth:
-
Most businesses, because they start small, have an entrepreneurial structure
...
As businesses grow they may introduce a traditional structure
...
In some businesses a matrix structure may be favoured
...
They may work together on
a specific project
...
Disadvantages of the matrix structure:
-
Sometimes groups are not correctly organised
...
Can cause a lot of arguments
...
Tema 24: Departmental functions
Business may be divided into 4 departments:
-
Human resources
...
Marketing
...
Human resources department:
-
Workforce planning
...
Training
...
Staff welfare
...
Industrial relations
...
Disciplinary and grievance procedures
...
Finance department:
-
Recording transactions
Wages and salaries
Credit control
Cash flow forecasting and budgets
Accounts
...
Product planning
...
Sales promotion
...
Customer service
...
Packaging
...
Stock control
Maintenance
...
Relationships and interdependence between departments:
-
The production department may have to meet with the marketing department to
discuss changes to a customer’s order
...
The HR department will need to communicate regularly with the finance
department to discuss wages and salaries
...
Tema 25:Sources of finance
The need for funds:
Short-term needs:
-
Sometimes the revenue from sales may not cover all the expenditure, this is when a
business will need to borrow money
...
Short-term finance: money borrowed for one year or less
...
Some long-term finance comes from the owners
...
Capital often remains in the business permanently or until the business stops
trading
...
Because a lot of resources are needed before trading can begin
...
They may want
to:
Expand capacity to meet growing orders
...
Internal sources of finance:
Internal finance: finance generated by the business from its own means
...
It would be rare for an entrepreneur to set up a business in which all the money
needed to get started came from an external source
...
Retained profit:
-
Is profit that has been returned to the owners
...
There are no charges involved, such as interest, dividends or administration
Profit is used by the business; it cannot be returned to the owners
...
-
Assets: resources used or owned by a business, such as cash, stock…
If we don’t have unwanted assets this might not be possible
...
Short-term sources may be needed for the following reasons:
-
Some businesses have seasonal trade
A manufacturer may need finance to pay for raw materials and wages to meet a
large order
A firm might be short of money because it is waiting for a customer to pay
...
Main sources of short-term finance:
Bank overdraft:
-
Agreement with a bank where a business spends more money than it has in its
account (up to an agreed limit)
...
Trade payables:
-
Buying resources from suppliers, such as raw materials and components and
paying for them at a later date (sometimes called trade credit)
However, it has some disadvantages:
-
Many suppliers encourage early payment by offering discounts
...
The cost of goods is often higher if firms buy on credit
...
Allows paying for something without your money
...
The amount borrowed and interest, must be repaid in regular instalment over a
fixed period
...
Long-term loans: more than 12 months and has a lower rate of interest
...
If the business collapses the bank may not get its money back
...
Debenture:
-
Is a long-term security yielding a fixed rate of interest, issued by a company and
secured against assets
...
Hire purchase:
-
Buying specific goods with a loan, often provided by a finance house
...
Remaining fee is paid in monthly instalments
...
Agreements can be short term or long term
If the buyer falls behind with the payments the goods can be repossessed
...
Interest payments are avoided
Main disadvantage of issuing shares to raise capital is the cost of administration
Venture capital: (better explanation in pg
...
Venture capital generally comes from well-off
investors, investment banks and any other financial institutions
...
Help people, not concerned in getting profit
...
Another business can act as “the crowd”
...
Tema 26:Cash flow forecasting
The importance of cash:
-
Cash is the most liquid of all businesses
...
-
Cash is the notes and coins a business keeps on the premises and any money it has
in the bank
...
Poor cash Flow is why businesses usually fail
...
This means that goods are bought and delivered and then payment is made at a
later date, 30 -90 days later
...
Businesses need to have cash to pay overheads
Businesses will often get bills for the services that they have already used, again, if
These bills are not paid; there is a risk that such services will be cut
...
Unless a business can raise cash immediately to pay, they will collapse
...
Always plans ahead by producing accurate cash Flow forecasts
...
The difference between cash and profit:
Cash: money in the account
Profit: what we have when we take away the cost
-
The value of profit will not be the same as the cash balance
...
So at the end of the period some
customers will still owe money
...
Similarly, a
business may receive cash at the beginning of the trading period from credit sales
made in the previous period
...
Sometimes owners might put more cash into the business
...
The effect will be the same if a
business borrows some money
...
This is because the purchase of assets is not included for the
purpose of calculating profit
...
Cash inflows and outflows:
Cash inflows: flow of money into a business
...
E
...
loans
Cash outflow: flow of money out of a business
...
Net cash flow: Is the difference between cash inflows and cash outflows
...
If it's
negative the business may need to borrow some money
...
It also shows the closing balance at the end of each month
...
(takes into account the cash inflows and the cash outflows)
Why are cash flow forecasts important?
-
-
-
Identifying cash shortages: A forecast can help to identify in advance when a
business might need to borrow cash
...
This helps to identify when, or if, a bank overdraft
will be needed
...
This
help to show the future outlook for the business
Help when planning the business: It helps to clarify aims and improve
performance
...
Monitoring Cash flow: By doing this it can find out where problems have occurred
...
Tema 27:Costs
Costs: expenses that must be met when setting up and running businesses
...
These
resources are examples of costs
...
All these costs, and many others, can be classified
according to how they behave when output changes are fixed or variable
...
(fixed costs are sometimes
called overheads)
Fixed costs = total costs – variable costs
Examples:
-
Rent
Interest payments
Business rates
...
Variable costs = price of one item x number of units wanted
-
If a firm produces more output, variable cost increases
If output levels are cut, variable costs will fall
If a firm produce nothing, variable costs be zero
Examples:
-
Raw materials
Packaging
Total costs - Fixed costs + variable costs
Average cost - Total costs/ Quantity produced
Total revenue - Price x quantity
Profit - Total revenue – total cost
Tema 28: Break- even analysis
The concept of Break-even:
-
Is the level of output where total costs and total revenue are exactly the same:
neither a profit or a loss is made
...
Output is measured on the horizontal axis and revenue, costs and profit are measured in
the vertical axis
...
EXAMPLE IN PAGE 223 THE CHART
Variable costs start at 0
Total revenue line start at 0
The cheaper the good the more far away the total revenue is
...
This helps
to check that your chart is correct
...
It is necessary to choose two levels of output and
work out the total cost and total revenue at each level
...
Effects of changes in price and costs on the break-even analysis:
-
If price is higher, TR will be steeper and the break-even point will shift to the left
...
If fixed costs is higher, the TR will move upward with the steepness unchanged and
the break-even point will shift to the right
If fixed cost is lower, TC will move downward with the steepness unchanged and
the break-even point will shift to the left
...
(diagrams page 235)
The limitations of a break-even chart:
A break-even chart shows:
-
How much output a business has to produce in order to break even
The costs, revenue and profit at different levels of output
The margin of safety
However, the chart does have some limitations:
-
The TC and TR are shown as straight lines
...
The accuracy of the break-even chart depends on the quality and accuracy of the
data used to construct total cost and total revenue
...
Skimming or creaming: Setting a high price initially and then lowering it later
...
Extension strategies: methods used to lengthen the life of a product
...
Boston matrix: 2x2 Matrix that describes products according to their market
share they enjoy and whether the market has any potential for growth
Penetration pricing: Setting a low price to start with in order to get established in
the market; the price may be raised once established
...
Analysis
Whether products are marketable, technically possible, a suitable fit with a current
portfolio and legal
...
Commercialisation and launch
During this stage a business puts the ‘final touches’ to their product and the product is
finally launched
...
Introduction: Businesses introduce new products with an official launch, others with
skimming or penetration pricing
...
Extension strategies
Finding new markets for the product- for example, selling abroad
Finding new uses for a product
Modifying the product
Develop the product range- for example, a crisp manufacturer bringing out new flavours
Change the appearance or packaging
Encourage more frequent use for the product
Managing and reviewing the product portfolio
Stars: Are valuable products for a business
...
They are likely to be profitable
...
They have a high market share but the market is not likely to
grow very much
...
Question marks: Are products with a low market share but the market is growing
...
They have potential
...
They have low market share and the market is not
likely to grow more
...
Chapter 37: Price
Vocabulary:
Cost-plus or cost-based pricing: Adding a percentage to the costs of producing a product to
get the price
...
Competition based pricing: Pricing strategies based on the prices charged by rivals
...
Loss leader: Products sold below cost to draw in customers
...
Objectives: pricing can be used to achieve certain aims
Taxes: many goods have taxes on them
Costs: costs have to be covered so that profit is made
Competition: Prices are often influenced by those charged by rivals
...
Some of these sales are seasonal
...
99
instead of $100
Loss leaders
Some products are sold at a price lower than cost
...
Chapter 38: Place
Vocabulary:
intermediary: person or organisation that helps to arrange agreements or business deals
between other people or organisations
wholesalers: person or businesses that buy goods from manufacturers and sell them in
smaller quantities to retailers
bulk breaking: dividing a large quantity of goods received from a supplier before selling
them on in smaller quantities to customers
Distribution channels
distribution channels: route taken by the product from the producer to the consumer
Retailing
retailers: businesses that buy goods from manufacturers and wholesalers and sell them in
smaller quantities to consumers
they buy large quantities from manufacturers and wholesalers and sell smaller quantities
to customers
they sell in locations that are convenient to consumers
They may add value to products by providing other services
Independents
tend to be relatively small outlets
Supermarkets
large stores selling up to 200000 products lines including groceries, fresh food…
Department stores
large stores split into distinct selling departments such as menswear, nightwear, cosmetics,
food
...
Cheap and low overheads
Market traders
small-time businesses selling goods from market stalls
...
They will also prefer direct
channels as it is cheaper
The market
Producers selling to mass markets are likely to use intermediaries, however businesses
targeting smaller markets are more likely to target customers directly
Control
For some producers it is important to have complete control over distribution
Chapter 39: Promotion
Above-the-line promotion
Placing adverts using the media
Television: huge audience can be reached however it is really expensive
Newspapers and magazines: relative cheap however no movement or sound
Cinema: Big impact with big screen however limited audience
Radio: cheap however not visual
Posters and billboards: seen repeatedly however posters can get damaged
Internet: cheap however some adverts such as pop-up adverts are irritating
Below-the-line promotion
Any promotion that does not involve using the media
...
Bulk buying is a purchasing
economy
...
This reduces a risks in business
External economies of scale
Cost benefits that all firms in the industry can enjoy when the industry expands
Skilled labour
If if an industry is concentrated in one area there may be a buildup of labour with the skills
and work experience required by that industry
Infrastructure
If a particular industry dominates a region the roads, railways, buildings and other
facilities will be shaped to suit that industries needs
Ancillary and commercial service
An established industry in a region will encourage ancillary suppliers in that industry to
set up close by
Cooperation
When firms in the same industry are located close to each other they are likely to
cooperate with each other so that they can all gain
Diseconomies of scale
Rising average costs when a firm becomes too big
Bureaucracy
System of administration that uses a large number of departments and officials
...
Labour relations
If a firm becomes too big, relations between workers and managers may deteriorate
Control and coordination
A very large business may be difficult to control and coordinate
Other limits to growth
Lack of finance
Some businesses would like to grow but are not able to raise the finance needed to expand
Nature of the market
Some markets are too small to sustain very large companies
Lack of managerial skills
Some businesses may be prevented from growing because the owners do not have
managerial skills required to run a large business operation
Lack of motivation
Some business owners do not want to grow their businesses
Chapter 41: Production and productivity
Batch production
Production involves converting resources into goods or services
...
Job production
Method of production that involves employing all factors to complete one unit of output at
a time
Flow production
Flow production is a large scale production of a standard product, were each operation on
a unit is performed continuously one after the other, usually on a production line
Labour and capital intensive production
Labour intensive production is production methods that make more use of labour related
to machinery
...
The impact of using different types of production
Job production
The quality of output from job production is usually very high as skilled workers often
carry the job and are motivated because the work is varied
...
Batch production
Unit costs are likely to be lower when batch production is adopted
...
However, work may be less interesting for workers because of specialisation
...
However products are
standardised and set up costs are very high
...
Labour productivity= total output/ number of workers
Capital productivity= total output/ capital employed
Increasing labour productivity
government investing more
People more motivated
Labour organised and managed more effectively
Labour more flexible
Increasing capital productivity
Downsizing
process of reducing capacity, usually by laying off staff
...
Relocation
Businesses often relocate their operations to improve efficiency
...
Outsourcing
It may be possible to improve efficiency by outsourcing specific business activities
...
Lean production
Reducing the amount of resources used
The impact on business of productivity improvements
Financial impact
If a business is able to improve productivity, there should be a positive financial impact on
the business
...
However, some of the measures used to improve productivity may cost more money
...
This will help the business
to secure a competitive edge
...
Workforce
Workers are likely to be affected
...
If
non financial incentives are used workers job will become more interesting
...
Customers
Customers are likely to benefit with lower prices due to lower costs in the business
...
42 Lean production
Title: Business IGSCE Pearson Edexcel
Description: A lot of time spent, very useful and detailed
Description: A lot of time spent, very useful and detailed