CAIE IGCSE Business Studies Notes PDF

ZNOTES.ORG UPDATED TO 2023-2025 SYLLABUS CAIE IGCSE BUSINESS STUDIES SUMMARIZED NOTES ON THE THEORY SYLLABUS Prepared for Ayyan Aboobacker for personal use only. CAIE IGCSE BUSINESS STUDIES Businesses combine scarc...

ZNOTES.ORG UPDATED TO 2023-2025 SYLLABUS CAIE IGCSE BUSINESS STUDIES SUMMARIZED NOTES ON THE THEORY SYLLABUS Prepared for Ayyan Aboobacker for personal use only. CAIE IGCSE BUSINESS STUDIES Businesses combine scarce factors of production to produce goods or services to satisfy people’s needs and 1. Understanding Business wants. Business Activity: Activity Combines scarce factors Produces goods and services 1.1. Business Activity Employs people Needs: goods or services that are essential for survival. 1.4. Added Value Wants: goods or services customers desire but are not essential for survival. Added value is the difference between the cost of Economic Problem: unlimited wants but limited resources purchasing bought-in material and the price of the to satisfy the wants. finished goods. Scarcity: the lack of sufficient products to fulfil the total wants of the population. Added Value = selling price – total cost Factors of production: resources needed to produce For example, by transforming cotton into a T-shirt, the goods and services; they are: business adds value to the cotton, as the same material Land – any natural resource used in production. can be sold for more after the transformation. Labour – mental and physical efforts of employees. It is NOT the profit because added value does not include Capital – finance, machinery and equipment needed the expenses of producing this good (e.g. labour, for the manufacture of goods. electricity, machinery, etc.) Enterprise – individual/s who manage/coordinate the three other factors, make decisions and take risks. Advantages Disadvantages Opportunity Cost: the next best alternative is given up by Maybe able to make a profit if choosing another item. Increasing the product's price these other costs come to a Due to scarce resources, a choice has to be made; this can lead to lower sales and, total less than the added leads to opportunity cost. perhaps, profit. value It can be used to pay other 1.2. Importance of Specialisation expenses. Specialisation: When people and businesses focus on what To increase added value, a business can either: they are best at. Increase the selling price by increasing the quality of Division of labour is when production is split into different goods and services to convince customers/consumers tasks, and each worker performs one of these tasks. It’s a Reduce the cost of materials but keep the price the same. form of specialisation. Advantages Disadvantages 1.5. Classification of Businesses Workers are trained in one repetitive tasks can cause task and specialise in this, boredom and burnout for Businesses can be classified into three sectors: increasing productivity and employees, reducing Primary Sector: Industry extracts and uses the earth's efficiency motivation and job efficiency natural resources to produce raw materials for other businesses. If a worker is not present, Secondary Sector: The industry manufactures goods Specialisation with division of production will be disrupted, using the raw materials provided by the primary labour will result in better causing a waste of time and sector. quality output resources, as well as less Tertiary sector: The Industry provides services to output and efficiency. consumers and other industry sectors. Specialised workers require Developing Countries: where the primary sector is the An increase in efficiency will higher wages, and training most important, as more employees and output are lead to economies of scale. current employees will produced than in secondary and tertiary sectors increase costs. Developed Countries: where the output of the tertiary Workers become more skilled sector is often higher than the other two sectors and experienced, reducing combined. waste of time and resources. De-industrialisation occurs when there is a decline in the importance of the secondary sector. 1.3. Purpose of Business Activity WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Reasons for changes in the relative importance of the Advantages Disadvantages three sectors over time: It may become successful and Lack of knowledge and When sources of some primary products become very profitable if the business experience in starting and depleted grows operating a business Developed economies are losing competitiveness to Lost income from not being newly industrialised countries. Able to make use of personal an employee for another Due to the rise in living standards, consumers spend interests and skills business (Opportunity cost) more of their income on services such as travel and restaurants than on manufactured goods. They will have to invest their savings as well as find other Profits to themselves, no need sources of finance, which is 1.6. Mixed Economy to share them with anyone time-consuming and expensive Has both a private sector and a public sector. Private Sector: Businesses NOT owned by the Income is higher than a government will decide what and how to produce. The regular employee main aim is to make profits. Public Sector: Owned by the government. Government 1.8. Business Plans will decide what and how to produce (i.e. healthcare, education, defence, public transport). The main aim is Business Plan: a document containing the business to provide a service to customers. objectives and essential details about operations, finance Privatisation refers to selling a public sector business to and owners of the new business. the private sector. Contents of business plan:- Description of the product Arguments against Arguments for Privatisation Products and services Privatisation The market Costs can be controlled Increased unemployment as Business location and how products will reach because the private sector’s private sector businesses may customers main objective is profit. want to cut costs. Organisation structure and management Less likely to focus on social Financial information More efficient use of capital objective business strategy Competition between private Business plans assist entrepreneurs because: sector businesses will help It helps gain finance. Banks will ask for a business plan improve product quality. before agreeing to a loan or overdraft for the business It forces the entrepreneur to plan carefully, which reduces the risk of the business failing. 1.7. Enterprise, Business Growth and Size 1.9. Government Support for Start-Ups An entrepreneur is a person who organises, operates and Governments encourage entrepreneurs to set up a takes risk to make the business better business because start-ups: Characteristics of Entrepreneurs: reduce unemployment Hard-working Increase competition Risk Takers Increase output Creative Benefit society Effective Communicators Further growth of the economy Optimistic Governments may give support to entrepreneurs by: Self-confident Business ideas & help, organising training for Innovative entrepreneurs that gives advice, and support Independent. sessions. Finance, they may lend loans at low-interest rates or Advantages and Disadvantages of being an Entrepreneur: grants, as well as low-cost premises Advantages Disadvantages Governments provide grants for training employees to entrepreneurs will have to put make them more efficient and productive Independent, able to choose their own money into the Governments allow entrepreneurs to use research how to use time and money business. facilities in Universities Able to put own ideas into many entrepreneur’s practice businesses fail (risky) 1.10. Business Size WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Why is it beneficial to compare business size? increasing the size of its premises and hiring more labour Investors can decide which business to invest in. if needed. Government, different tax rates for small and large External Growth is when the business takes over or firms. merges with another business. Competitors, to compare size and importance with Takeover: When one business buys out the owners of other firms. another business, which then becomes part of the Workers, to have an idea of the number of employees ‘predator’ business. needed. Merger: When two owners of a business agree to join Banks, the importance of the loan compared to their businesses together business size. There are three types of External Growth: There are several different measurements of business Horizontal Integration: The same industry and stage of size, and they all have limitations: production firms merge or take over. For example, a chocolate manufacturer takes over Measurements Limitations another chocolate manufacturer. The number of people Capital-intensive firms Benefits: employed in the business employ fewer people but Reduces the number of competitors in the (accessible to calculate) produce high levels of output. industry The value of the output of the Does not take into account Opportunities for economies of scale business (useful for same the value of goods sold and A bigger share of the total market can be industry Businesses) the sale of goods. achieved Problems include diseconomies of scale and The value of sales (useful for different businesses sell difficulty in controlling and managing the business retail businesses, especially if different products (expensive Vertical Integration: when one business merges or similar products) and cheap) takes over another business in the same industry but Some businesses use Labour- at different stages of production, it can be forward or The total value of capital intensive methods, which backwards. employed (takes into account require less capital, more Forward integration is when merging/takeover is all values of capital) workers done with the next stage of production, Ex. a chocolate manufacturing company (secondary Capital Employed: the total value of capital used in the sector) merging with a chocolate shop (tertiary business sector) No method of measuring the size is considered correct, Benefits for forward: as each method gives different answers. Businesses The merger provides an assured outlet for choose the method they think is the best. Therefore, its products businesses may use more than one method. The expanded business absorbs the profit margin made by the retailer/Manufacturer. 1.11. Business Growth Information regarding consumer needs and preferences can be obtained directly from There are several ways of measuring the size of the the manufacturer. business Backward integration is when Number of Employees merging/takeover is done with the previous Capital Employed production stage, Ex. a chocolate Output or sales manufacturing company takes over a cocoa Market Share farm. Benefits of the expansion of the business: Benefits for Backward: The possibility of higher profits for the owner. Merger gives an assured supply of More status and prestige for owners and managers. essential components Lower average costs. The expanding business absorbs the A larger share of its market portion of total market profit margin of suppliers. sales it makes is greater. A supplier could be prevented from supplying to other manufacturers. Ways of Business Growth Costs of components and supplies are controlled. Businesses can either grow by: Conglomerate Merger: a firm merging/taking over Internal Growth another firm in a different industry. (also known as External Growth ‘diversification’) Internal Growth is when the business expands its existing For example, a chocolate manufacturer is merging operations by purchasing additional equipment, with a photography company. WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Benefits: Businesses usually have: Activity in more than one industry will diversify Limited liability: the liability of shareholders in a and spread the risk taken by the business. company is limited to only the amount they invested Transferring ideas to different sections can Less risk, as the owner is only risking the capital they help the business. invested, as well as any legal charges effect only the business and not the owner directly Disadvantages Caused by Business Growth 1.14. Sole Trader Control and management get harder with expansion (can be prevented by carefully planning expansions and It is a business owned and controlled by one person- the adjusting management style and hierarchy). owner, who is the sole proprietor. It is a form of an Larger businesses lead to poor communication (stronger unincorporated business. and more efficient communication channels can prevent it). Advantages Disadvantages Expansion costs are high and can result in a shortage of Few legal regulations (Easy to Decisions can be hard to finance for businesses (A financial plan must be prepared set up) make in anticipation of expansion; it can include short/long-term loans to compensate for financial loss). No separate legal identity, Complete control Integrating with another business can cause conflicts and unlimited liability difficulties, such as business culture and style of May not be able to raise funds Flexible working time management. (Compromises will have to be made, or a to expand business new style of management can be applied altogether, Ability to respond quickly to which can help reduce conflicts) the needs and wants of May have to work long hours customers Why Small Businesses Remain Small? Difficult to compete with large All profit goes to the owner firms The size of their market is small Access to capital is limited Complete secrecy in Business May not have the proper skills Personal Choice of the owner matters to run a business The size and cost of technology 1.15. Partnerships 1.12. Why Businesses Fail Partnerships: A form of business in which two or more Lack of Management Skills – from lack of experience, poor people agree to own a business jointly. It can be set up by choice of managers (family business), bad decisions can creating a partnership deal. It’s a form of unincorporated occur business. Failure to plan for change – businesses must adapt to an Deal of partnership: The written and legal agreement ever-changing business environment. It would be best if between business partners. It is not essential but is risks were taken. recommended Over-Expansion – (diseconomies of scale) Contents of Partnership Agreement: Poor financial management and liquidity issues Amount of capital invested by all partners Competition with other businesses – intense competition Tasks to be done by each partner in the market can make it hard for new businesses to set The way profits are shared out up, as already established businesses can drive newly How long partnership will last established businesses out of the market with their low, Arrangements for absence, retirement and how competitive prices. partners could be let known Advantages Disadvantages 1.13. Legal Identity Easy to set up a deed of Unlimited liability partnership Unincorporated Business: A business that does not possess a separate legal identity from its owner. These Greater access to funds Share the profit Businesses usually have: Business ceases to exist if shared decision-making Unlimited liability: the owner can be held responsible one partner leaves for the business's debts. shared management and Decisions binding on all Greater risk, as owner is putting his personal workload partners possessions and living at risk. Difficult to raise finance Incorporated Business: Business with a separate legal identity. Private/Public limited companies. These WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES and brand. 1.16. Private Limited Company (LTD) Advantages to franchisor Disadvantage to franchisor Private Limited Company: Business owned by shareholders but cannot sell shares to the public (can only Franchisee buys the licence, Bad reputation if one branch sell to family and friends). which means another source has poor management Shareholders: Owners of a limited company who buy of finance shares represent part-ownership of the company. The franchisee keeps some Expansion is faster profit Advantages Disadvantages Training, some aspects of Management is the Raise capital from the sale of Cannot sell shares to the administration, and responsibility of the shares public advertising are paid by the franchisee Limited liability for franchisor Legal formalities shareholders Percentage of sale revenue is Accounts are available for the given to the franchisor every Separate legal identity public to see year Continuity Not easy to transfer shares Advantages to franchisee Disadvantages to franchisee Articles of Association: Contains the rules for managing Chances of business failure Less independence the company. are reduced Memorandum of Association: Contains vital information The franchisor pays for Unable to make decisions that about the company and the directors. advertising would suit the local area These also apply to a public limited company. The franchisor has the power Fewer decisions to make with to withdraw the agreement an independent business and can prevent the use of 1.17. Public Limited Company (PLC) the premises Public Limited Company: Businesses owned and The franchisor provides controlled by the shareholders, but they sell to the public, training for staff and and their shares are tradeable on the stock exchange. management Banks are often willing to lend Advantages Disadvantages to franchisees due to the low Can sell shares to the public Legal Formalities risk. Rapid expansion Disclosure of accounts and possible/specialist managers other information 1.19. Joint Venture appointed Divorce between ownership Joint Venture: is when two or more businesses join Limited liability and control together to create a new business Continuity Expensive to ‘go public‘ Advantages Disadvantages Annual General Meeting (AGM): A yearly meeting where Profits have to be shared if Sharing of costs shareholders may attend to vote for a Board of Directors the project is successful for the upcoming year. Knowledge and experience Conflict in decision-making Dividends: Payments made to shareholders from the can be shared profit of a company. They are the return for investing in Different methods of running Risks shared the company. a business can create conflict 1.18. Franchise 1.20. Public Corporations Franchise: An agreement of a business based upon an Public Corporations: a business in the public sector owned existing brand/business and controlled by the state of government (By appointing Franchisee: the company that received permission to a board of directors and setting objectives). conduct business using the company’s name and brand. Have to pay an original fee to the franchisor and a Advantages Disadvantages percentage of its profit for the privilege The Franchisor: the company that allows another company to conduct business using the company’s name WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Advantages Disadvantages After achieving a high market share, it aims to “return Government ownership may to shareholders”. be essential to some The profit objective is not as A profit-making business hit with a crisis now has the countries' industries, such as short-term objective of survival. powerful or important as in water supply and electricity private-sector industries. Changes in consumer tastes and spending patterns Technological changes generation. New Sources of Competition Inefficiency because Ensure consumers are not managers rely too much on taken advantage of 1.22. Social Objectives the government It can be unfair to the private Reduce wasteful competitors sector if subsidies are Objectives of Social Enterprise provided to the public sector. Social Enterprise: an enterprise with social objectives and Can help stabilize failing aims to make a profit to reinvest in the business. It has Lack of close competition can businesses to create job three objectives: decrease many activities opportunities Social: to provide jobs and support for disadvantaged It can be used for political groups reasons, preventing the Environmental: to protect the environment. Important public services business from opportunities Financial: to make a profit to reinvest in the enterprise like other profit-making and expand its social work. businesses. Objectives of Public Sector Businesses 1.21. Business Objectives Financial: Meet profit targets set by the government - either reinvested or funded back to the government. Business Objectives are aims or targets a business works Service: meet quality targets the government sets and towards provide services to the public. Businesses need objectives to help them be successful. Social: protect or create employment in certain areas. However, they don’t guarantee success. Benefits of having business objectives: A clear target to work towards, thus improving 1.23. Stakeholder Objectives Motivation. It can help in decision-making. Stakeholder: any person or group with a direct interest in It helps unite the whole business towards the same the performance and activities of a business There are two types of stakeholder groups: goal. Internal Stakeholders work/own the company (owners, It can be used to compare how the business performs through objectives. managers, workers) Private sector business objectives: External Stakeholders are outside the business Business Survival - Adjust to business environment, (consumers, government, banks, change price of products if necessary suppliers, Wider community, Pressure groups, and Generating profit (total income of business revenue competitors) subtracted by total cost)– pay a return to owners or Each stakeholder group has different objectives for the provide finance to invest further in business performance of the business Returns to shareholders - discourage shareholders Internal Stakeholder (Owners, managers and employees) from selling their shares. This can be done by objectives are payments or profits; they want business increasing profit or increasing the share price growth, so the value of investment increases, or they get Growth of business – increase salaries, economies of higher status/power scale. This is only achieved if customers are satisfied Customers' objectives are reliable products, value for with the product money, good quality, good design and good service Government objectives include money from taxes, Market Share (the total percentage of total market employing more people, increasing the country’s output sales held by one brand or business) - gives good publicity and more influence over suppliers and The bank’s objectives are to make a profit out of loans and customers. the payback of interest. Company Sales Since different stakeholders have different objectives, it Calculation = 100 × Total market Share may cause conflict, to try to please all the stakeholders ​ Why business objectives can change: For example, customers want cheap products, but It will work towards profit after being set up and workers want higher salaries. stable. WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Therefore, managers must compromise to decide which objectives are best for the company. 2. People in Business 2.1. Motivating Employees Motivation Motivation: factors that influence the workers' behaviour towards achieving business goals. Factors that influence motivation at work: Money Job Security Advantages Disadvantages Training Promotion It is difficult to identify how It is possible for managers to Status much of the needs have been satisfy some or all of their Responsibilities met or which level each needs Work environment worker is on Easy to set goals and It doesn’t include money as a Benefits of a Well-Motivated Workforce objectives need Not all needs are included. Improved productivity Self-actualization is rarely, if Low rate of absenteeism (Workers’ non-attendance at ever, achieved. work without a good reason) Low rate of labour turnover (The rate at which workers Fredrick Herzberg - Two-Factor Theory leave the business) Better quality goods and services Hygiene Factors: The factors that must be present in the Improved labour productivity (A measure of the efficiency workplace to prevent job dissatisfaction. of workers by calculating the output per worker) Working Conditions: Things that show how clean and safe the workplace is and what facilities are provided Key Motivational Theories Relationship with others: Good working relationships with workers and managers, and treated fairly with F.W. Taylor - Scientific Management Theory respect. It aims to reduce inefficiency in the workplace by finding Salary and wages the quickest method of performing tasks and training all Supervisions: Leadership style and how closely works workers to use this method. are supervised The theory of economic man: the theory that humans are Company policy and administration: rules and only motivated by money, in which Taylor believed that procedures that control and affect the workplace. money was the only motivational factor. Hygiene Factors must be present to prevent job The piece rate method of paying production came from dissatisfaction his research. Job dissatisfaction: How unhappy and discontent a person Disadvantages: is with their job. His ideas were too simplistic Motivators (Factors that influence a person to increase If employees are unfulfilled with their work, their effort): productivity won’t be gained, no matter how high the The work itself: Variety of jobs and challenging tasks wage. through job enrichment. If employees’ output can’t be measured, practical Responsibility: Giving workers responsibility for tasks problems arise. they perform. Advancement: Opportunity for promotion Abraham Maslow: Concept of Human Needs - Maslow’s Achievement: They feel like they have reached a Hierarchy challenging goal. Recognition of Achievements: Recognised by the people for their achievements 2.2. Methods of Motivation WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Financial Rewards: cash and non-cash rewards paid to Advantages Disadvantages workers motivate them to increase their efforts. Profit to employees may Linked to the performance of reduce dividends to Time rate: payment to workers based on a fixed amount every hour worked. the business shareholders or the amount reinvested in the business. Advantages Disadvantages Business only pays workers Non-financial rewards and methods: These are methods used Pay is not linked to how much to motivate workers that do not involve giving any financial for the number of hours they produce rewards. worked Job Rotation: increasing variety in the workplace by Salary: fixed annual payment to specific grades and types allowing workers to switch from one task to another. of staff, not based on hours worked or output, usually Job satisfaction: how content and happy a person is with divided into 12 equal monthly payments. their job Job Enlargement: increasing or widening tasks to increase Advantages Disadvantages the variety of workers. They do not receive more Job Enrichment: organising work so workers are Salary is not linked to effort or payment if they have to work encouraged to use their full ability. This increases job the amount produced long hours to complete the satisfaction. task. Job redesign: increasing the variety or difficulty of tasks to discuss more exciting and challenging work for workers. Piece Rate: Payment to workers based on the number of Quality circles: a group of workers who meet regularly units produced. lower down in the organisation. Team working: organising production so that groups of Advantages Disadvantages workers complete the whole unit of work. Quality of goods may vary Delegation: passing responsibility for performing a task to Workers are only paid for the because of the need to workers lower down in the organisation. number of items produced produce more goods to increase pay Benefits of decrease in labour turnover: There is no need to hire new employees, decreasing Commission: Paying sales staff based on the value of recruitment costs, training costs, and retaining skilled items they sell. It is often paid in addition to a basic wage employees. This improves productivity. or salary to retail employees and others involved in sales. Advantages Disadvantages 2.3. Organisation and Management Pay is linked to the value of Workers are never sure of goods sold how much they will earn Organisational Structure: levels of management and division of responsibilities within a company. Bonus scheme: an additional reward paid to workers for Organisational Charts: refers to diagrams that outline the achieving the target set by managers. Method of internal management structure. Hierarchy refers to the levels of management in any performance-related pay. organisation. Advantages Disadvantages Levels of Hierarchy: refers to Linked to a performance If the target is unrealistic, it management/supervisors/other employees who are given target can be demotivating a similar level of responsibility in an organisation. Example of Organisational Chart: Fringe benefits: non-cash rewards used to recruit and retain workers and recognise certain employees' status. (e.g. Car, insurance, health care) Advantages Disadvantages Helping recruitment and Linked to status, not retaliation of workers performance Benefits: Profit sharing: an additional payment to workers based on The chart shows how everybody is linked in the the business's profit. organisation, which allows employees to be aware of their communication channel (chain of command). WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Everyone can see what they are accountable for, Advantages Disadvantages which they have authority over, and who to take Increased workload on orders from. managers, thus decreasing Everyone is in a department, thus giving a sense of Reduces cost the quality of work and its belonging completion. Chain of Command: The structure in an organisation Communication and decision- Have to make redundancy allows instructions to be passed down from senior making are quicker due to payments to employees who management to subordinates. reduced chain of command. lost their job The Span of Control: The number of subordinates working directly under a manager. Increases the opportunity for Subordinate: an employee below another employee in the delegation, which helps in Reduction in job security organisation’s hierarchy. motivation Senior managers are in close Two Types of Organisational structures of a business: Reduce effective touch with what is going on in management of subordinates the business Tall Structure: the longer the chain of command is, the ‘taller‘ the organisational structure and the ‘narrower‘ the span of control. Delegation: Giving a subordinate the authority to perform particular tasks. Advantages Disadvantages Some managers are reluctant Application of job enrichment, to delegate, as they will be leading to job satisfaction held accountable for any errors A form of training for junior Managers lose some control managers over subordinates Achieving the Esteem needs (Maslow’s hierarchy) Flat Structure: when a chain of command is short, the organisation will have a ‘wider’ span of control, thus Centralised Organisation: one where all the important making it a ‘flat‘ structure. decision-making power is held at the head office/the centre and then passed down to lower levels. Advantages Disadvantages Decision-making is often Slower communication Advantages of Short Chain of Command: quicker Communication and decision-making are quicker. Decisions are taken for the Unable to respond quickly to Fewer management levels to build connections with by benefit of the whole business changes in the local market the top management. Greater use of specialist staff May reduce motivation The span of control will be wider, encouraging improves decision-making managers to delegate more and allowing workers to feel trusted. Decentralised Organisation: Advantages of a long chain of command: As decisions get passed down, it is checked by Advantages Disadvantages multiple people, thus reducing error and preventing Decisions are made based on Decisions taken might not be bad decisions from happening local needs. in the interest of the business Lesser subordinates means management can focus Poor decisions might be made more on their designated workers. It can be used to train junior often due to lack of Factors affecting the size of the span of control: managers. experience and skills Difficulty of the task Delegation helps improve The experience and skill of workers worker motivation. The size of the business the level of hierarchy Management style 2.4. Role and Function of Management Delayering: reducing the size of the hierarchy by removing one or more levels, often the middle Directors: are senior managers who lead a particular management. department or division of a business. Responsibilities: WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Setting strategy (long-term plans) Advantages Disadvantages Reviewing the performance of managers. There is no opportunity for Provide leadership Quick decision-making employee input into key Making sure resources are available process decisions, which can be Line Managers: manage employees and are responsible demotivating for the team development and performance. Supervisors: are junior managers who supervise and are Democratic Leadership: gets other employees involved in responsible for the employees below them in the the decision-making. Characteristic: organisational structure. Staff Managers: are specialists who provide support information. And assistance to line managers. The functions of managers include: Planning – Planning is about where the business is now and where it wants to be. Once it has been decided, management must set clear objectives and an action plan. Organising – Management will have to decide the best way of completing important tasks at the lowest possible cost to the business. Motivation is higher Communicating - Control and supervision of Creativity and engagement with workers are subordinates also aim to motivate workers to achieve encouraged. the planned objectives. Workers and employees are involved in decision- Coordinating - Making sure that all the different parts making. of the business are working together to achieve the business’s goals and corporate objectives. Advantages Disadvantages Controlling – involves checking to make sure that the Better Decisions could result plan is working and if it would be completed in time Unpopular decisions could not from consulting with and the required standard, and if not, then correcting effectively be made using this employees using their ideas it style and experiences. Extra functions managers do: Understand the people who work for them Laissez-Faire Leadership: makes the broad objectives Set a good example known to employees, but then they are left to make Delegate tasks decisions and organise their work. Characteristics: Treat subordinates fairly communicate effectively 2.5. Leadership Styles Leadership Styles: are the different approaches to dealing with people and making decisions when in a position of authority. There are three leadership styles: Autocratic Leadership: where the manager expects to be in charge of the business and to have their orders Workers and employees are expected to make the followed. Characteristics: decisions. The leader will only give guidance. The leader only takes charge when necessary. Advantages Disadvantages It is unlikely to be appropriate Encourage employees to in organisations with a show creativity and consistent and clear decision- responsibility making structure. A leader does all the decision-making 2.6. Trade Unions Don’t take input from others. Highly structured working environment WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Trade Unions: A group of employees who have joined to comply with all the redundancy, dismissal and protect their interests. disciplinary laws. The Role of Trade Unions: 2.8. Recruitment Process Negotiating with employers to improve pay and working conditions. 1. Analyse the exact nature of the job and duties to be Resolving conflict by negotiating a solution on behalf of its undertaken. members Job analysis: it identifies and records the Providing legal support and advice. responsibilities and tasks relating to a job Providing services for members including holiday scheme, 2. Design a job specification: pension scheme, insurance scheme, etc. Job Specification: outlines the responsibilities and duties to be carried out by someone employed to Advantages Disadvantages do a specific job. Several functions of a job Strength in numbers when It costs money to be a specification: negotiating with employer member This information should be given to applicants Workers may be required to so they know exactly what the job entails. Improved conditions of Allows a job specification to be drawn up to see take industrial actions even if employment. if they are skilled. they disagree. It shows if an employee is working effectively Trade unions can organise once they are employed. strikes against employers if Improved environment where The contents of a Job specification: they don’t receive the pay Condition of employment salary, hours, people work. levels and work conditions permission, etc. they deserve. Training that will be offered Improved benefits for Wages are likely higher - Opportunities for promotion members not working adding to business costs - Purpose of the job because of sickness, when many employees are Main duties/addition or occasional duties retirement, or redundancy. trade union members. 3. Job description: a document that outlines the tasks and responsibilities that will need to be carried out as part 2.7. Work of Human Resource of the specific job – so that applicants know what the job involves and so they know if they are suitable to Department apply for the job Usual Requirements: Recruitment and Selection: The level of educational qualification Recruitment: is the process of identifying that the Special skills, knowledge, or a particular attitude business needs to employ someone up to the point at Personal Characteristics which applications have arrived. 4. Person Specification: outlines the required skills, Employee Selection: is the process of evaluating qualifications, personal qualities, etc., for a specific job candidates for a specific job and selecting an – to ensure a suitably qualified person is appointed individual based on the organisation's needs. and that they have the skills, etc., to do the job Wages and Salaries: required. These must attract and retain the right people and be 5. Advertise the vacancy: sufficiently high to motivate employees. The first stage is to decide how the post will be Industrial Relations: filled. There must be effective communication between representatives of management and the workforce. This may be to resolve grievances and disputes and put forward ideas and suggestions for improvements. Training Programs: It involves assessing and fulfilling the training needs of employees. This should also be linked to the plan. Health and Safety: The business must ensure that it complies with all the laws on health and safety. Redundancy and Dismissal: This involves releasing employees, either because the business changes in some way or because the employee is not satisfactory. The business must WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Internal Recruitment: is when a vacancy is filled by someone The general character and personality of the who is an existing employee of the business applicant. Advantages Disadvantages Some businesses include tasks in the selection Quicker and cheaper than No new ideas or experiences process, such as: external recruitment. come into the business. Skill test (ability to carry out specific tasks) Aptitude test (candidate’s potential of learning The reliability, ability, and Rivalry and jealousy may a new skill). potential of the person are arise. Personality test (used if a particular type of known. person is required). The person is already familiar Group situation test (to show how well they The quality of internal with the organisation's work with a team). candidates might be low. structure and expectations. 7. Hold interviews and select tasks. It can be motivating for other 8. Select suitable applicants and offer them the job. employees to see their fellow Reply to unsuccessful applicants. workers promoted. The final decision can depend on several factors: Work experience External Recruitment: when any suitable applicant outside the Education and other qualifications business fills a vacancy Age Advantages Disadvantages Internal A more comprehensive Increased costs due to External Circumstance selection of candidates. advertising. Adding fresh perspective and Additional training 2.9. Types of Workers ideas. Adds a transitional period for Enhancing diversity in the Part-time Employees work for less than 35 hours a week. all employees to adjust to the organisation. Benefits: new business Work hours are flexible. Finding a specialised Easier to ask employees to work at busy times candidate who fits the Effects on employee morale. More accessible to extend business requirements perfectly. opening/operating hours by working evenings or Can help the competitiveness weekends. of the business It fits in with looking after children or other Reduce tension between circumstances such as school, which means employees. employees are willing to lower pay. Reduces business cost 5. Send out application forms to the applicants or read In some countries, it’s easier to make part-time curriculum resumes and letters of application. workers redundant. Advertising job vacancies can be done in several Limitations: ways: They are less likely to seek training, as they see Local newspapers the job as temporary. National newspapers Takes longer to recruit. Specialist magazines Less commitment to business. Online recruitment sites Less likely to be promoted due to lack of Recruitment agencies experience. Centres run by the government It is more difficult to communicate outside of work. 6. Produce a shortlist from the applications for Full-time Employees work for more than 35 hours a week interviews and take up references. Benefits: Applicants must provide a referee (someone the Consistency of schedules and reliability potential employer can contact, intending to get Loyalty - A permanent contract means the more information/references from). employee is more loyal Interviews are the most used form of selection. Its Limitations: primary purpose is to assess in the shortest time A permanent contract has to be made, a long-term possible: commitment. Applicant’s ability to do the job Full-time employees have fixed pay, regardless of Any personal qualities that could be beneficial the number of hours committed to work (ex, sick or not. leave, slow work day, emergency, etc). WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Note: full-time employee benefits are the Advantages Disadvantages limitations of part-time and vice versa If taught in the evening, Workers are being paid but employees can work during not doing any work. 2.10. The Importance of Training and the day the Methods of Training Often uses expert trainers Additional qualifications mean an employee's chances of who have up-to-date business Importance of training: leaving for another job are practices and knowledge. To introduce new processes or equipment high. Improve the efficiency of the workforce Provide training for unskilled workers 2.11. Why Reducing the Size of the Decrease the supervision needed Improve opportunity for internal promotion Workforce Might Be Necessary Decrease chances of accidents Aims of training: Workforce Planning: establishing the workforce the Increase skills business needs for the foreseeable future regarding the Increase knowledge number and skills required. Improve employee’s attitudes to encourage them to Reasons to reduce workforce: accept change and raise awareness. Automation (robots replacing human jobs) There are three types of training: Falling demand for their goods or services Induction Training: an introduction given to an employee, Factory/shop/office closure explaining the business’s activities, customs, and The business might have relocated abroad procedures and introducing them to their fellow workers. Businesses are being taken over/merged, and now there are too many workers doing the same job Advantages Disadvantages Two ways a business can reduce the number of Helps new employees settle employees: Time-consuming Dismissal: employment ends against the employee's into their jobs quickly will, usually for not following an employment contract. Maybe a legal requirement to Workers are being paid while Redundancy: when an employee is no longer needed give health and safety training no work is being done and loses their job. It’s not due to any aspect of their at the start work being unsatisfactory. Workers are less likely to Delays the start of work for Factors that decide in redundancy: make mistakes the employee Workers may volunteer and are happy to be made redundant due to finding another job. On-the-job Training: Occurs by watching a more Length of time employed by the business - employees experienced worker doing their job. might have worked long hours and expect high payments. Advantages Disadvantages Workers who have skills that could be used in multiple The individual is given in the Trainers won’t be as departments are retained. workplace, so there is no productive because they are The worker's employment history- whether they are need to send them away. teaching employee punctual, good at their job, etc. The trainer might have bad Which departments need to lose, and which need to Ensures there is some habits and pass them on to retain workers production while training the employee Extra information: workers can retire (get old Not recognized training Usually costs less than off- and want to stop working) and resign (find qualifications outside the the-job training another job), but it’s through the employee’s business will in those two cases. Training tailored to the specific needs of the business. 2.12. Legal Controls Over Employment issues Off-the-job training: Involves being trained away from the workplace, usually by specialist trainers. The most important employment issues affected by legal controls are: Advantages Disadvantages A broad range of skills can be The Contract of Employment: A legal agreement between Costs are high an employer and employee, listing the rights and taught responsibilities of workers. WWW.ZNOTES.ORG Copyright © 2024 ZNotes Education & Foundation. All Rights Reserved. This document is authorised for personal use only by Ayyan Aboobacker at Arab Unity School on 06/10/24. CAIE IGCSE BUSINESS STUDIES Impact on Employers and Employees: As many unskilled workers receive higher wages, it Both know what is expected from them. will encourage them to be more productive. Provides security of employment for employee It will encourage people to seek work. If the employee does not meet the condition of the Low-paid workers will earn more and have higher contract, then legal dismissal is allowed. living standards, making them afford to buy more. If an employee fails to meet the conditions of the Increase business costs contract, then the employee can seek legally Some employers will not be able to afford these wage binding compensation. rates. Unfair Dismissal: when an employer ends a worker’s Higher-receiving workers may ask for higher pay to employment contract for a reason not covered by the keep the exact difference between them, increasing contract. business costs. Industrial Tribunal: a law court (legal meeting) judges disagreements between companies and their employees. 2.13. Internal and External Impact on Employer and Employee: The Employer must have an accurate record of a Communication worker’s performance if they want to claim that the employee has broken the contract before Effective Communication is important so that the dismissing them. information sent in the message is received, understood, Employees have employment security — as long and acted upon as it should be. Otherwise, lack of as they fulfill their contract or are not made communication can lead to severe consequences. redundant. There are two types of communication in businesses: Allowed employees to take their employer to an Internal Communication: communication between industrial tribunal if they felt like they weren’t being employees of the same business. treated fairly, and they could get compensation if it External Communication: communication between the were found to be true. business and other businesses and individuals. It makes businesses less likely to mistreat External communication has to be especially efficient employees. because it establishes the image and the efficiency of a Protection against discrimination (due to unfair reasons business such as gender, race, colour, etc.). i.e. if a company communicates inefficiently with their Impact on Employers and Employees: suppliers, they might receive the incorrect materials Employees have to be careful when wording Effective communication involves: advertisements for a job. 1. The transmitter/sender sending a message to Applicants must be treated equally, or the pass on information business will be prosecuted and fined. 2. A medium of communication ?