CAIE IGCSE Business Studies Past Paper Summary (2023-2025)

ZNOTES.ORG UPDATED TO 2023-2025 SYLLABUS CAIE IGCSE BUSINESS STUDIES SUMMARIZED NOTES ON THE THEORY SYLLABUS CAIE IGCSE BUSINESS STUDIES Businesses combine scarce factors of production to...

ZNOTES.ORG UPDATED TO 2023-2025 SYLLABUS CAIE IGCSE BUSINESS STUDIES SUMMARIZED NOTES ON THE THEORY SYLLABUS 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 scare factors Produces goods and services 1.1. Business Activity Employees 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 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 CAIE IGCSE BUSINESS STUDIES Why is it beneficial to compare business size? Merger: When two owners of a business agree to join Investors can decide which business to invest in. their businesses together Government, different tax rates for small and large There are three types of External Growth: firms. Horizontal Integration: The same industry and stage of Competitors, to compare size and importance with production firms merge or take over. other firms. For example, a chocolate manufacturer takes over Workers, to have an idea of the number of employees another chocolate manufacturer. needed. Benefits: Banks, the importance of the loan compared to Reduces the number of competitors in the business size. industry There are several different measurements of business Opportunities for economies of scale size, and they all have limitations: A bigger share of the total market can be achieved Measurements Limitations Problems include diseconomies of scale and The number of people Capital-intensive firms difficulty in controlling and managing the business employed in the business employ fewer people but Vertical Integration: when one business merges or (accessible to calculate) produce high levels of output. takes over another business in the same industry but The value of the output of the Does not take into account at different stages of production, it can be forward or business (useful for same the value of goods sold and backward. industry Businesses) the sale of goods. Forward integration is when merging/takeover is done with the next stage of production, Ex. a The value of sales (useful for different businesses sell chocolate manufacturing company (secondary retail businesses, especially if different products (expensive sector) merging with a chocolate shop (tertiary similar products) and cheap) sector) Some businesses use Labour- Benefits for forward: The total value of capital intensive methods, which The merger provides an assured outlet for employed (takes into account require less capital, more its products all values of capital) workers The expanded business absorbs the profit margin made by the retailer/Manufacturer. Capital Employed: the total value of capital used in the Information regarding consumer needs and business preferences can be obtained directly from No method of measuring the size is considered correct, the manufacturer. as each method gives different answers. Businesses Backward integration is when choose the method they think is the best. Therefore, merging/takeover is done with the previous businesses may use more than one method. stage of production, Ex. a chocolate manufacturing company takes over a cocoa 1.11. Business Growth farm. Benefits for Backward: Benefits of the expansion of the business: Merger gives an assured supply of The possibility of higher profits for the owner. essential components More status and prestige for owners and managers. The expanding business absorbs the Lower average costs. profit margin of suppliers. A larger share of its market portion of total market A supplier could be prevented from sales it makes is greater. supplying to other manufacturers. Costs of components and supplies are Ways of Business Growth controlled. Conglomerate Merger: a firm merging/taking over Businesses can either grow by: another firm in a different industry. (also known as Internal Growth ‘diversification’) External Growth For example, a chocolate manufacturer is merging Internal Growth is when the business expands its existing with a photography company. operations Benefits: External Growth is when the business takes over or Activity in more than one industry will diversify merges with another business. and spread the risk taken by the business. Takeover: When one business buys out the owners of Transfer of ideas in the different sections can another business, which then becomes part of the help the business. ‘predator’ business. Disadvantages Caused by Business Growth WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES Control and management get harder with expansion (can It is a business owned and controlled by one person- the be prevented by carefully planning expansions and owner, who is the sole proprietor. It is a form of an adjusting management style and hierarchy). unincorporated business. Larger businesses lead to poor communication (stronger and more efficient communication channels can prevent Advantages Disadvantages it). Few legal regulations (Easy to Decisions can be hard to Expansion costs are high and can result in a shortage of set up) make finance for businesses (A financial plan must be prepared No separate legal identity, in anticipation of expansion; it can include short/long-term Complete control unlimited liability loans to compensate for financial loss). May not be able to raise funds Integrating with another business can have conflicts and Flexible working time to expand business difficulties, for example, business culture and style of Ability to respond quickly to management. (Compromises will have to be made, or a new style of management can be applied altogether, the needs and wants of May have to work long hours which can help reduce conflicts) customers Difficult to compete with large All profit goes to the owner Why Small Businesses Remain Small? firms Complete secrecy in Business May not have the proper skills The type of industry the business operates in matters to run a business Market share Owners’ objective 1.15. Partnerships 1.12. Why Businesses Fail Partnerships: A form of business in which two or more people agree to own a business jointly. It can be set up by Lack of Management Skills – from lack of experience, poor creating a partnership deal. It’s a form of unincorporated choice of managers (family business), bad decisions can business. occur Deal of partnership: The written and legal agreement Failure to plan for change – businesses must adapt to an between business partners. It is not essential but is ever-changing business environment. It would be best if recommended risks were taken. Contents of Partnership Agreement: Over-Expansion – (diseconomies of scale) Amount of capital invested by all partners Poor financial management and liquidity issues Tasks to be done by each partner Competition with other businesses – intense competition The way profits are shared out in the market can make it hard for new businesses to set How long partnership will last up, as already established businesses can drive newly Arrangements for absence, retirement and how established businesses out of the market with their low, partners could be let known competitive prices. Advantages Disadvantages 1.13. Legal Identity Easy to set up a deed of Unlimited liability partnership Unincorporated Business: A business that does not Greater access to funds Share the profit possess a separate legal identity from its owner. These Business ceases to exist if Businesses usually have: shared decision-making one partner leaves Unlimited liability: the owner can be held responsible 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 1.16. Private Limited Company (LTD) Businesses usually have: Limited liability: the liability of shareholders in a Private Limited Company: Business owned by company is limited to only the amount they invested shareholders but cannot sell shares to the public (can only Less risk, as the owner is only risking the capital they sell to family and friends). invested, as well as any legal charges effect only the Shareholders: Owners of a limited company who buy business and not the owner directly shares represent part-ownership of the company. 1.14. Sole Trader Advantages Disadvantages WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES Advantages Disadvantages Advantages to franchisor Disadvantage to franchisor Raise capital from the sale of Cannot sell shares to the The franchisee keeps some Expansion is faster shares public profit Limited liability for Training, some aspects of Legal formalities Management is the shareholders administration, and responsibility of the Accounts are available for the advertising are paid by the Separate legal identity franchisee public to see franchisor Continuity Not easy to transfer shares Percentage of sale revenue is given to the franchisor every Articles of Association: Contains the rules for managing year the company. Memorandum of Association: Contains vital information Advantages to franchisee Disadvantages to franchisee about the company and the directors. Chances of business failure Less independence are reduced These also apply to a public limited company. The franchisor pays for Unable to make decisions that advertising would suit the local area 1.17. Public Limited Company (PLC) The franchisor has the power Fewer decisions to make with to withdraw the agreement Public Limited Company: Businesses owned and an independent business and can prevent the use of controlled by the shareholders, but they sell to the public, the premises and their shares are tradeable on the stock exchange. The franchisor provides Advantages Disadvantages training for staff and Can sell shares to the public Legal Formalities management Rapid expansion Banks are often willing to lend Disclosure of accounts and to franchisees due to the low possible/specialist managers other information risk. appointed Divorce between ownership Limited liability and control 1.19. Joint Venture Continuity Expensive to ‘go public‘ Joint Venture: is when two or more businesses join Annual General Meeting (AGM): A yearly meeting where together to create a new business shareholders may attend to vote for a Board of Directors for the upcoming year. Advantages Disadvantages Dividends: Payments made to shareholders from the Profits have to be shared if Sharing of costs profit of a company. They are the return for investing in the project is successful the company. Knowledge and experience Conflict in decision-making can be shared 1.18. Franchise Risks shared Different methods of running a business can create conflict Franchise: An agreement of a business based upon an existing brand/business Franchisee: the business a company allows to conduct 1.20. Public Corporations business using the company’s name and brand. Have to Public Corporations: a business in the public sector owned pay an original fee to the franchisor and a percentage of and controlled by the state of government (By appointing its profit for the privilege a board of directors and setting objectives). The Franchisor: the company that allows another company to conduct business using the company’s name Advantages Disadvantages and brand. Government ownership may be essential to some The profit objective is not as Advantages to franchisor Disadvantage to franchisor countries' industries, such as powerful or important as in Franchisee buys the licence, Bad reputation if one branch water supply and electricity private-sector industries. which means another source has poor management generation. of finance WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES Advantages Disadvantages Objectives of Social Enterprise Inefficiency because Ensure consumers are not Social Enterprise: an enterprise with social objectives and managers rely too much on taken advantage of aims to make a profit to reinvest in the business. It has the government three objectives: It can be unfair to the private Social: to provide jobs and support for disadvantaged Reduce wasteful competitors sector if subsidies are groups provided to the public sector. Environmental: to protect the environment. Can help stabilize failing Financial: to make a profit to reinvest in the enterprise Lack of close competition can businesses to create job and expand its social work. decrease many activities opportunities It can be used for political Objectives of Public Sector Businesses reasons, preventing the Important public services business from opportunities Financial: Meet profit targets set by the government - like other profit-making either reinvested or funded back to the government. businesses. Service: meet quality targets the government sets and provide services to the public. Social: protect or create employment in certain areas. 1.21. Business Objectives Business Objectives are aims or targets a business works 1.23. Stakeholder Objectives towards Businesses need objectives to help them be successful. Stakeholder: any person or group with a direct interest in However, they don’t guarantee success. the performance and activities of a business There are two types of stakeholder groups: Benefits of having business objectives: A clear target to work towards, thus improving Internal Stakeholders work/own the company (owners, managers, workers) Motivation. It can help in decision-making. External Stakeholders are outside the business It helps unite the whole business towards the same (consumers, government, banks) Each stakeholder group has different objectives for the goal. It can be used to compare how the business performs performance of the business through objectives. Internal Stakeholder (Owners, managers and employees) Private sector business objectives: objectives are payments or profits; they want business Business Survival - Adjust to business environment, growth, so the value of investment increases, or they get higher status/power change price of products if necessary Generating profit (total income of business revenue Customers' objectives are reliable products, value for subtracted by total cost)– pay a return to owners or money, good quality, good design and good service provide finance to invest further in business Government objectives include money from taxes, employing more people, increasing the country’s output Returns to shareholders - discourage shareholders The bank’s objectives are to make a profit out of loans and from selling their shares. This can be done by increasing profit or increasing the share price the payback of interest. Growth of business – increase salaries, economies of Since different stakeholders have different objectives, it scale. This is only achieved if customers are satisfied may cause conflict, to try to please all the stakeholders with the product For example, customers want cheap products, but workers want higher salaries. Market Share (the total percentage of total market sales held by one brand or business) - gives good Therefore, managers must compromise to decide which publicity and more influence over suppliers and objectives are best for the company. customers. Calculation = 100 × Company Sales Total market Share ​ 2. People in Business Why business objectives can change: It will work towards profit after being set up and stable. 2.1. Motivating Employees After achieving a high market share, it aims to “return to shareholders”. Motivation A profit-making business hit with a crisis now has the short-term objective of survival. Motivation: factors that influence the workers' behaviour towards achieving business goals. Factors that influence motivation at work: 1.22. Social Objectives WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES Money Advantages Disadvantages Job Security It is difficult to identify how Training Is it possible for managers to much of the needs have been Promotion satisfy some or all of their met or which level each Status needs worker is on Responsibilities Easy to set goals and It doesn’t include money as a Work environment objectives need Benefits of a Well-Motivated Workforce Not all needs are included. Self-actuation is rarely, if Improved productivity ever, achieved. Low rate of absenteeism (Workers’ non-attendance at work without a good reason) Fredrick Herzberg - Two-Factor Theory Low rate of labour turnover (The rate at which workers leave the business) Hygiene Factors: The factors that must be present in the Better quality goods and services workplace to prevent job dissatisfaction. Improved labour productivity (A measure of the efficiency Working Conditions: Things that show how clean and of workers by calculating the output per worker) safe the workplace is and what facilities are provided Relationship with others: Good working relationships Key Motivational Theories with workers and managers, and treated fairly with respect. F.W. Taylor - Scientific Management Theory Salary and wages Supervisions: Leadership style and how closely works It aims to reduce inefficiency in the workplace by finding are supervised the quickest method of performing tasks and training all Company policy and administration: rules and workers to use this method. procedures that control and affect the workplace. The theory of economic man: the theory that humans are Hygiene Factors must be present to prevent job only motivated by money, in which Taylor believed that dissatisfaction money was the only motivational factor. Job dissatisfaction: How unhappy and discontent a person The piece rate method of paying production came from is with their job. his research. Motivators (Factors that influence a person to increase Disadvantages: their effort): His ideas were too simplistic The work itself: Variety of jobs and challenging tasks If employees are unfulfilled with their work, through job enrichment. productivity won’t be gained, no matter how high the Responsibility: Giving workers responsibility for tasks wage. they perform. If employees’ output can’t be measured, practical Advancement: Opportunity for promotion problems arise. Achievement: They feel like they have reached a Abraham Maslow: Concept of Human Needs - Maslow’s challenging goal. Hierarchy Recognition of Achievements: Recognised by the people for their achievements 2.2. Methods of Motivation Financial Rewards: cash and non-cash rewards paid to workers motivate them to increase their efforts. Hourly Wage rate: payment to workers based on a fixed amount every hour worked. Advantages Disadvantages Business only pays workers Pay is not linked to how much for the number of hours they produce worked Advantages Disadvantages Salary: fixed annual payment to specific grades and types of staff, not based on hours worked or output WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES Advantages Disadvantages Job Enrichment: organising work so workers are They do not receive more encouraged to use their full ability. This increases job payment if they have to work Salary is not linked to effort or satisfaction. Job redesign: increasing the variety or difficulty of tasks to long hours to complete the the amount produced discuss more exciting and challenging work for workers. task. Quality circles: a group of workers who meet regularly lower down in the organisation. Piece Rate: Payment to workers based on the number of Team working: organising production so that groups of units produced. workers complete the whole unit of work. Advantages Disadvantages Delegation: passing responsibility to perform a task to workers lower down in the organisation. Quality of goods may vary Workers are only paid for the because of the need to Benefits of decrease in labour turnover: number of items produced produce more goods to increase pay There is no need to hire new employees, decreasing recruitment costs, training costs, and retaining skilled Commission: Paying sales staff based on the value of employees. This improves productivity. items they sell. 2.3. Organisation and Management Advantages Disadvantages Pay is linked to the value of Workers are never sure of Organisational Structure: refers to the levels of goods sold how much they will earn 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 target set by managers. Method of internal management structure. performance-related pay. Hierarchy refers to the levels of management in any 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). Advantages Disadvantages Everyone can see what they are accountable for, Profit to employees may which they have authority over, and who to take Linked to the performance of reduce dividends to orders from. the business shareholders or the amount Everyone is in a department, thus giving a sense of reinvested in the business. belonging Chain of command - The structure in an organisation Non-financial rewards and methods: methods used to allows instructions to be passed down from senior motivate workers that do not involve giving any financial management to subordinates. rewards. The span of control - The number of subordinates working directly under a manager. Job Rotation: increasing variety in the workplace by Subordinate: an employee below another employee in the allowing workers to switch from one task to another. organisation’s hierarchy. Job satisfaction: how content and happy a person is with their job There are two types of organisational structures of a Job Enlargement: increasing or widening tasks to increase business: the variety of workers. WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES Tall Structure: the longer the chain of command is, the Advantages Disadvantages ‘taller‘ the organisational structure and the ‘narrower‘ the Senior managers are in close span of control. Reduce effective touch with what is going on in management of subordinates the business 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 Flat Structure: when a chain of command is short, the managers over subordinates organisation will have a ‘wider’ span of control, thus Achieving the Esteem needs making it a ‘flat‘ structure. (Maslow’s hierarchy) Centralised Organisation: one where all the important decision-making power is held at the head office/the centre and then passed down to lower levels. Advantages of short chain of command: Communication and decision-making are quicker. Advantages Disadvantages Fewer management levels to build connections with by Decision-making is often the top management. Slower communication quicker The span of control will be wider, encouraging Decisions are taken for the Unable to respond quickly to managers to delegate more and allowing workers to feel trusted. benefit of the whole business changes in the local market Advantages of a long chain of command: Greater use of specialist staff May reduce motivation As decisions get passed down, it is checked by improves decision-making multiple people, thus reducing error and preventing bad decisions from happening Decentralised Organisation: Lesser subordinates means management can focus more on their designated workers. Advantages Disadvantages Factors affecting the size of the span of control: Decisions are made based on Decisions taken might not be Difficulty of the task local needs. in the interest of the business The experience and skill of workers Poor decisions might be made The size of the business It can be used to train junior often due to lack of managers. the level of hierarchy experience and skills Management style Delegation helps improve Delayering: reducing the size of the hierarchy by worker motivation. removing one or more levels, often the middle management. 2.4. Role and Function of Management Advantages Disadvantages Increased workload on Directors: are senior managers who lead a particular managers, thus decreasing department or division of a business. Responsibilities: Reduces cost Setting strategy (long-term plans) the quality of work and its completion. Reviewing the performance of managers. Provide leadership Communication and decision- Have to make redundancy Making sure resources are available making are quicker due to payments to employees who Line Managers: manage employees and are responsible reduced chain of command. lost their job for the team development and performance. Increases the opportunity for Supervisors: are junior managers who supervise and are delegation, which helps in Reduction in job security responsible for the employees below them in the motivation organisational structure. WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES 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. Communicating - Control and supervision of Motivation is higher subordinates also aim to motivate workers to achieve Creativity and engagement with workers are the planned objectives. encouraged. Coordinating - Making sure that all the different parts Workers and employees are involved in decision- of the business are working together to achieve the making. business’s goals and corporate objectives. Advantages Disadvantages Controlling – involves checking to make sure that the plan is working and if it would be completed in time Better Decisions could result Unpopular decisions could not and the required standard, and if not, then correcting from consulting with effectively be made using this it employees using their ideas style Extra functions managers do: and experiences. Understand the people who work for them Set a good example Laissez-Faire Leadership: makes the broad objectives Delegate tasks known to employees, but then they are left to make Treat subordinates fairly decisions and organise their work. Characteristics: 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 Trade Unions: A group of employees who have joined to protect their interests. Advantages Disadvantages There is no opportunity for The Role of Trade Unions: Quick decision-making employee input into key Negotiating with employers to improve pay and working process decisions, which can be conditions. demotivating Resolving conflict by negotiating a solution on behalf of its members Democratic Leadership: gets other employees involved in Providing legal support and advice. the decision-making. Characteristic: WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES Providing services for members including holiday scheme, 2. Design a job description: pension scheme, insurance scheme, etc. Job description: 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 description: negotiating with employer member Given to applicants so they know exactly what Workers may be required to 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 description: they don’t receive the pay people work. Condition of employment salary, hours, 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. Design a job specification: 4. Job description: is a document that outlines the 2.7. Work of Human Resource requirements, qualifications, physical characteristics, etc. For a specified job. Department Usual Requirements: The level of educational qualification Recruitment and Selection: Special skills, knowledge, or a particular attitude Recruitment: is the process of identifying that the Personal Characteristics business needs to employ someone up to the point at 5. Advertise the vacancy: which applications have arrived. The first stage is to decide how the post will be Employee Selection: is the process of evaluating filled. candidates for a specific job and selecting an individual based on the organisation's needs. Internal requirement: is when a vacancy is filled by someone Wages and Salaries: who is an existing employee of the business These must attract and retain the right people and be Advantages Disadvantages sufficiently high to motivate employees. Quicker and cheaper than No new ideas or experiences Industrial Relations: external recruitment. come into the business. There must be effective communication between The reliability, ability, and representatives of management and the workforce. Rivalry and jealousy may potential of the person are This may be to resolve grievances and disputes and arise. known. put forward ideas and suggestions for improvements. Training Programs: The person is already familiar The quality of internal It involves assessing and fulfilling the training needs of with the organisation's candidates might be low. employees. This should also be linked to the plan. structure and expectations. Health and Safety: It can be motivating for other The business must ensure that it complies with all the employees to see their fellow laws on health and safety. workers promoted. Redundancy and Dismissal: This involves releasing employees, either because the External Requirement: when a vacancy is filled by any suitable business changes in some way or because the applicant outside the business employee is not satisfactory. The business must Advantages Disadvantages comply with all the redundancy, dismissal and A more comprehensive Increased costs due to disciplinary laws. selection of candidates. advertising. Adding fresh perspective and 2.8. Recruitment Process ideas. Additional training Adds a transitional period for 1. Analyse the exact nature of the job and duties to be Enhancing diversity in the all employees to adjust to the undertaken. organisation. new Job analysis: it identifies and records the responsibilities and tasks relating to a job WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES Advantages Disadvantages Easier to ask employees to work at busy times Finding a specialised More accessible to extend business candidate that fits the Effects on employee morale. opening/operating hours by working evenings or requirements perfectly. weekends. It fits in with looking after children or other Can help the competitiveness circumstances such as school, which means of the business employees are willing to lower pay. Reduce tension between Reduces business cost employees. In some countries, it’s easier to make part-time workers redundant. 5. Send out application forms to the applicants or read Limitations: curriculum resumes and letters of application. They are less likely to seek training, as they see Advertising job vacancies can be done in several the job as temporary. ways: Tasks longer to recruit. Local newspapers Less commitment to business. National newspapers Less likely to be promoted due to lack of Specialist magazines experience. Online recruitment sites It is more difficult to communicate outside of work. Recruitment agencies Full-time Employees work for more than 35 hours a week Centres run by the government Benefits: 6. Produce a shortlist from the applications for Consistency of schedules and reliability interviews and take up references. Loyalty - A permanent contract means the Applicants must provide a referee (someone the employee is more loyal potential employer can contact, intending to get Limitations: more information/references from). A permanent contract has to be made, a long-term Interviews are the most used form of selection. Its commitment. primary purpose is to assess in the shortest time Full-time employees have fixed pay, regardless of possible: the number of hours committed to work (ex, sick Applicant’s ability to do the job leave, slow work day, emergency, etc). Any personal qualities that could be beneficial or not. Note: full-time employee benefits are the The general character and personality of the limitations of part-time and vice versa applicant. Some businesses include tasks in the selection 2.10. The Importance of Training and process, such as: Skill test (ability to carry out specific tasks) the Methods of Training Aptitude test (candidate’s potential of learning Importance of training: a new skill). Personality test (used if a particular type of To introduce new processes or equipment person is required). Improve the efficiency of the workforce Group situation test (to show how well they Provide training for unskilled workers Decrease the supervision needed work with a team). 7. Hold interviews and selection of tasks. Improve opportunity for internal promotion 8. Select suitable applicants and offer them the job. Decrease chances of accidents Reply to unsuccessful applicants. Aims of training: Increase skills The final decision can depend on several factors: Work experience Increase knowledge Improve employee’s attitudes to encourage them to Education and other qualifications Age accept change and raise awareness. Internal There are three types of training: Induction Training: an introduction given to an employee, External explaining the business’s activities, customs, and Circumstance procedures and introducing them to their fellow workers. 2.9. Types of Workers Advantages Disadvantages Helps new employees settle Part-time Employees work for less than 35 hours a week. Time-consuming into their jobs quickly Benefits: Work hours are flexible. WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES Advantages Disadvantages Redundancy: when an employee is no longer needed Maybe a legal requirement to and loses their job. It’s not due to any aspect of their Workers are being paid while work being unsatisfactory. give health and safety training no work is being done Factors that decide in redundancy: at the start Workers may volunteer and are happy to be Workers are less likely to Delays the start of work for made redundant due to finding another job. make mistakes the employee Length of time employed by the business - employees might have worked long hours and On-the-job Training: Occurs by watching a more expect high payments. experienced worker doing their job. Workers who have skills that could be used in multiple departments are retained. Advantages Disadvantages The worker's employment history- whether The individual is given in the Trainers won’t be as they are punctual, good at their job, etc. workplace, so there is no productive because they are Which departments need to lose, and which need to send them away. teaching employee need to retain workers The trainer might have bad Ensures there is some Extra information: workers can retire (get old habits and pass them on to production while training and want to stop working) and resign (find the employee another job), but it’s through the employee’s Not recognized training Usually costs less than off- will in those two cases. qualifications outside the the-job training business Training tailored to the 2.12. Legal Controls Over Employment specific needs of the issues business. The most important employment issues affected by legal Off-the-job training: Involves being trained away from the controls are: workplace, usually by specialist trainers. The Contract of Employment: A legal agreement between Advantages Disadvantages an employer and employee, listing the rights and A broad range of skills can be responsibilities of workers. Costs are high Impact on Employers and Employees: taught Both know what is expected from them. If taught in the evening, Workers are being paid but Provides security of employment for employee employees can work during not doing any work. If the employee does not meet the condition of the the day contract, then legal dismissal is allowed. Additional qualifications mean If an employee fails to meet the conditions of the Often uses expert trainers an employee's chances of contract, then the employee can seek legally who have up-to-date business leaving for another job are binding compensation. practices and knowledge. high. Unfair Dismissal: when an employer ends a worker’s employment contract for a reason not covered by the 2.11. Why Reducing the Size of the contract. Industrial Tribunal: a law court (legal meeting) judges Workforce Might Be Necessary disagreements between companies and their employees. Impact on Employer and Employee: Workforce Planning: establishing the workforce the The Employer must have an accurate record of a business needs for the foreseeable future regarding the worker’s performance if they want to claim that the number and skills required. employee has broken the contract before Reasons to reduce workforce: dismissing them. Automation (robots replacing human jobs) Employees have employment security — as long Falling demand for their goods or services as they fulfil their contract or are not made Factory/chop/office closure redundant. The business might have relocated abroad Allowed employees to take their employer to an Businesses are being taken over/merged, and now industrial tribunal if they felt like they weren’t being there are too many workers doing the same job treated fairly, and they could get compensation if it Two ways a business can reduce the number of were found to be true. employees: It makes businesses less likely to mistreat Dismissal: employment ends against the employee's employees. will, usually for not following an employment contract. WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES Protection against discrimination (due to unfair reasons i.e. if a company communicates inefficiently with their such as gender, race, colour, etc.). suppliers, they might receive the incorrect materials Impact on Employers and Employees: Effective communication involves: Employees have to be careful in wording 1. The transmitter/sender sending a message to advertisements for a job. pass on information Applicants must be treated equally, or the 2. A medium of communication – the method for business will be prosecuted and fined. sending a message (i.e. e-mail, phone, etc) Employees must all be treated equally, regardless 3. The message being sent to the receiver of gender, disability, colour, etc. 4. The receiver confirms that the message has been When businesses recruit and promote staff on received and responds to it (feedback) merit alone, it helps to increase motivation. There are two types of communication: Laws of health and safety at work, such as: One-way communication – where the receiver cannot Protect workers against dangerous machinery. reply to the message (i.e. posters) Provide safety equipment and clothing. Two-way communication – where the receiver can Maintain reasonable workplace temperatures. respond to the message could be just confirmation Provide hygienic conditions and washing facilities. that the message was received (e-mail) Do not insist on excessively long shifts, and provide breaks. The methods of communication include: Impact on employers and employees: Verbal Methods: The sender speaks to the receiver (i.e., Cost to the employer of meeting the health and through meetings, telephone, or video conference) safety regulations. Time needs to be found to train workers in Advantages Disadvantages health/safety precautions. Information is given out Workers feel ‘safer‘ and more motivated at work. If talking to many people, it’s quickly & an efficient way to Reduce accident rates and the cost of hard to tell whether everyone communicate with many compensation for workers injured at work. got the message. people. Legal minimum wage and its impact on employer and employee: It is unsuitable for accurate Opportunity for immediate It should prevent strong employers from exploiting messages, and a permanent feedback unskilled workers. message record is needed. As many unskilled workers receive higher wages, it The speaker’s body language will encourage them to be more productive. reinforces the message. It will encourage people to seek work. Low-paid workers will earn more and have higher Written Methods: the sender creates e-mails, memos or living standards, making them afford to buy more. letters, including the use of Information Technology Increase business costs Some employers will not be able to afford these wage Advantages Disadvantages rates. It might lead to too many e- Message can be referred to in Higher-receiving workers may ask for higher pay to mails and ‘information the future as “hard evidence.” keep the exact difference between them, increasing overload.’ business costs. Easy to explain complicated Two-way communication is messages difficult 2.13. Internal and External It can be copied and re-sent to It is hard to check if the Communication many people message has been received Effective Communication is important so that the Visual Methods: The sender uses diagrams, charts, information sent in the message is received, understood, videos, PowerPoints and acted upon as it should be. Otherwise, lack of Advantages Disadvantages communication can lead to severe consequences. There are two types of communication in businesses: If information is presented No feedback and needs other Internal Communication: communication between more appealingly, people will methods of communication to employees of the same business. be more interested in it. go with it External Communication: communication between the Graphs and charts may be It can be used to make written business and other businesses and individuals. difficult for people to messages clearer, to External communication has to be especially efficient understand, and the message illustrate the point because it establishes the image and the efficiency of a may be misunderstood business WWW.ZNOTES.ORG CAIE IGCSE BUSINESS STUDIES The message may be lost. 2.14. Methods of Communication Wrong channel used Technical break down Formal communication: when messages are sent through Overcome by: established channels using professional language. Insist on feedback; if none is given, the sender can Informal communication: when information is sent and assume the message is lost. received casually using everyday language. The sender must select an appropriate channel to The Direction of Communication avoid problems. Shortest possible channel to avoid problems Other forms of communication should be available. Problems with the receiver: Lack of trust Poor attitude Poor listener Overcome by: The message should be emphasised, and receivers should be asked for feedback to ensure understanding. If trust is not between sender and receiver, then the sender should try to build that trust, or perhaps Arrow A shows downward communication - where another sender who is respected by the receiver could messages are sent from managers to subordinates. Used be used. for instructions or statements, no feedback. Problems with feedback: Not sent Arrow B shows upward communication - when messages or feedback can be passed from subordinates to Unclear managers. Not asked for Arrow C shows horizontal communication - when people Overcome by: at the same level in an organisation communicate. Ideas Perhaps no feedback was asked, or the method of communication required no feedback, so another and info can be shared. Conflict can happen. technique that may allow feedback should be used. Direct lines of communication should be available. 2.15. Demonstrate an Awareness of Communication Barriers 3. Marketing Communication Barriers 3.1. The Role of Marketing Communication Barriers – Factors that stop effective communication of messages. Marketing Department: Communication Barriers and How Can They Be Marketing: Identifying and satisfying customer needs and Reduced or Removed satisfying them profitably. Customer: a person, business or other organisation which Problems with the sender: buys goods or services from a business. Poor attitude and body language The different marketing department sections: Unclear message Sales Team: responsible for the sales of products. If a Message too long product is exported, it may be called the export team.