business igcse (all topics) Flashcards
1.1 what is economic problem (2)
- unlimited wants but limited sources to fulfil this
- creates scarcity
1.1 what is scarcity (2)
- lack of products services
- to fulfil needs of population
1.1 factors of production (4)
- land: all natural resources (field, forest, oil, gas, minerals, metals)
- labor: number of people available to make products
- capital: finance, machinery and equipment needed to manufacture goods & services
- enterprise: skill & risk-taking ability of managers and owners of firms
1.1 what is opportunity cost (1)
next best alternative given up by choosing another item (ex.: buying car over paying rent, opportunity cost = paying rent & keeping home)
1.1 what is specialisation (1)
- when people and businesses concentrate on what they are best at
1.1 what is division of labor (2)
- when production process is split into different tasks
- each worker performs one specific task only
1.1 advantages of division of labor (2)
- workers trained in one task and specialise in it -> increases efficiency and output
- less time wasted moving from one workbench to another
1.1 drawbacks of division of labor (2)
- workers can become bored doing just one job -> efficiency might fall
- if a worker is absent and no one else can do the job, production might be stopped
1.1 what is the purpose of business activity (1)
combine the factors of production to make products which will satisfy peoples wants
1.1 what is added value (1)
difference between selling price and cost of bought-in materials
1.1 why is added value important (2)
- helps pay for operating expenses
- helps make a profit
1.1 how can a business increase added value (2)
- increasing selling price
- reducing cost of bought in materials
1.2 what is a primary sector (1)
extracts natural resources to supply raw materials to other businesses
1.2 what is secondary sector (1)
manufactures goods by using raw materials supplied by primary sector
1.2 what is tertiary sector (1)
provides services to consumers and other sectors of industry
1.2 what is a mixed economy (1)
economy with both a private sector and public sector
1.2 what is private sector (3)
- business owned by private individuals and not government
- decide on price to charge for goods/services
- main aim is to profit
1.2 what is public sector (3)
- government of a state own and control business
- money for these come from taxpayers
- objective: provide welfare to people in the economy
1.2 characteristics of successful entrepreneurs (4)
- risk taking
- confident
- creative
- innovative
1.3 what is a business plan (1)
document containing business objectives & details about finance, operations and owners of business
1.3 importance of entrepreneur creating business plan (2)
- need to produce one to show bank if they want to apply for bank loan
- forces entrepreneurs to think ahead to try and solve any potential problems
1.3 why government supports new startup firms (3)
- new firms create jobs and reduce unemployment in country
- increased output -> economy benefits from increased output
- new firms give consumers in country more choice of goods and services
1.3 how the government supports new firms (2)
- offer training to entrepreneurs who want to develop their skills of running a business
- may offer grants to businesses so they can afford to open up business
1.3 how to measure size of business (4)
- number of employees
- value of output
- value of sales revenue
- capital employed
1.3 drawbacks of measure methods (4)
- employees: if firm capital intensive, machinery carries out most production, number of employees = inaccurate
- output: firms may produce few products very valuable per unit = unfair representation of output
- sales revenue: unfair to compare small shop to luxury shop sales revenue
- capital: firm may be labor intensive, not much need for capital (machinery) invested
1.3 why owners want to increase business (3)
- increase profits
- benefit from economies of scale
- more status & prestige for owners
1.3 how a business can grow (2)
- internal growth: business expands existing operations
- external growth: business takes over/merges with another company
1.3 horizontal integration def (1)
business merges/takes over another business in the same stage of production
1.3 horizontal integration benefits (2)
- less competitors
- business can now benefit from economies of scale
1.3 horizontal integration drawbacks (2)
- diseconomies of scale
- communication more challenging as business is larger
1.3 why businesses fail (3)
- lack of management skills: bad decisions on innovating products/locating premises
- changes in business environment: recessions, covid, inflation
- liquidity problems: low ratios, not able to pay day to day expenses
1.4 what is unlimited liability (3)
- owners of business can be held responsible for debts of business
- personal possessions at risk of business can’t pay off debts
- sole traders and partnerships have unlimited liability
1.4 what is incorporated business (1)
business that has separate legal status from owners (LTD, PLCS)
1.4 what is unincorporated business (1)
don’t have separate legal status from owners (sole traders, partnerships)
1.4 what is a partnership (1)
business in which 2 or more people agree to jointly own a business
1.4 partnership benefits (3)
- more finance can be invested into business from all partners
- less stress as responsibilities are shared
- more ideas from partners -> lead to better products/customer service
1.4 partnership drawbacks (3)
- profits have to be shared
- disagreements can occur, distraction from focusing on quality of products/customer service
- unlimited liability
1.4 what is a private limited company (LTD) (2)
- business owned by shareholders
- cannot sell shares to public -> sell them to family and friends
1.4 LTD benefits (3)
- raise more capital from selling shares
- all owners have limited liability -> less risk
- can maintain control of business as they approve who they sell shares to
1.4 LTD drawbacks (2)
- cannot sell shares to public, limited ability to raise capital
- expensive to be an LTD, lots of legacies and paperwork to complete
1.4 what is a public limited company (PLC) (2)
- company owned by shareholders
- shares can be sold to public on stock exchange
1.4 PLC benefits (2)
- can raise more capital from selling shares to the public
- all owners have limited liability -> less risk
1.4 PLC drawbacks (2)
- risk that original owners may lose control of business when it goes public
- need to pay shareholders dividends -> less profit for original owners
1.4 what is a franchise (2)
- business with strong brand name
- franchiser (owner) sells rights to use brand name to franchisee
1.4 benefits to franchisor (2)
- receives royalties
- responsibilities of day to day running handed over to franchisee -> less stress
1.4 drawbacks to franchisee (2)
- poor management + bad reputation of one branch = risk of ruining entire brand reputation
- don’t get to keep 100% profit from every branch
1.4 what are joint ventures (1)
2 or more businesses start a new project together, sharing risks and profit
1.4 joint ventures benefits (3)
- businesses share costs of new project
- risk shared
- each business may benefit from knowledge/expertise of the other businesses
1.4 joint ventures drawbacks (2)
- profits shared
- disagreements may occur on how to run project, distraction from improving quality/service
1.4 what are public corporations (2)
- business owned and controlled by government
- usually initially owned by private sector and now owned by public sector
1.4 public corporations benefits (2)
-ensures consumers are not taken advantage of by privately owned monopolies
- important for providing non profitable but important services
1.5 what is a business objective (1)
- aim/target business works towards
1.5 why are business objectives important (2)
- give workers and managers clear target work -> increased motivation
- allows business to compare against their performance to judge wether they have been successful or not
1.5 types of business objectives (4)
- survival (common in first year/recession/new competitors enter market)
- profit
- growth
- increase market share (value of business sales compared to entire market)
1.5 what is a social enterprise (2)
- operated by private individuals
- have more than just profit objective (helping community/environment)
1.5 what are stakeholders (1)
person/group who has direct interest in performance and activities of business
1.5 what are internal stakeholders (3)
- owner (wants business to grow & gain profit)
- employees (want fair salary, good working conditions, job satisfactions, job security)
- managers (want job security and profits)
1.5 what are external stakeholders (4)
- customers (want safe & reliable products, high quality, fair price)
- government (make sure business is abiding to laws, want business success so low employment, earn corporation tax)
- local community (can get job in business, make sure business doesn’t damage local community)
- banks (want business to pay back bank loans with interest)
1.5 differences in objectives of private sector (1) and public sector enterprises (3)
- private sector = profit
-provide services to public - create employment
- make profit
2.1 why people work (5)
- money: pay necessities & luxuries
- security: knowing job & pay are safe
- social need: being part of a group + meeting new people
- esteem needs: feeling needed/important
- job satisfaction
2.1 benefits of well motivated workforce (5)
- high output per worker: decrease average costs, increase profits & efficiency
- willingness to accept change
- willing to communicate effectively with workers
- decreased labor turnover: lower recruitment & selection costs
- lower absenteeism: increased output & efficiency
2.1 Maslow’s hierarchy of needs (5)
- self actualisation
- esteem needs
- social needs
- security needs
- psychological needs
2.1 how Maslow’s hierarchy can be achieved generally (5)
- self actualisation: achieve full potential
- esteem needs: praising/recognition for doing good
- social needs: belonging & friendship
- security needs: protection
- psychological needs: shelter, water, food, rest
2.1 how Maslow’s hierarchy can be achieved in workplace (5)
- self actualisation: promotion
- esteem needs: praised for work/rewards
- social needs: staff social events, team bonding, supportive colleagues
- security needs: job security, safe working environment
- psychological needs: wages/salary to pay rent & buy food
2.1 F.W Taylor’s theory (4)
- how productivity can be increased
- workers motivated by money
- broke down jobs into simple processed and set target for employees
- targets reached = employees paid more money
2.1 benefits of F.W Taylor’s theory (1)
employees based on output, more motivated by money which makes them more productive and increases efficiency for the business
2.1 F.W Taylor’s theory drawbacks (2)
- employees not necessarily only motivated by money -> if business doesn’t provide good working conditions & relationships -> may cause demotivation
- often difficult to measure output in business
2.1 Herzberg sets of needs (2)
- basic needs/hygiene factors
- motivators (psychological growth)
2.1 what are Herzberg hygiene factors (4)
- good working conditions
- good relationships with supervisor & work colleagues
- salary/wage
- job security
2.1 what are Herzberg motivators (4)
- recognition
- achievement
- promotion
- the work itself
2.1 what are wages (2)
- regular payment paid every week
- either by time rate (paid by the hour) or piece rate (paid by quantity of products made)
2.1 time rate benefits (2)
- easy to calculate by company
- employees know exactly how much they should be paid
2.1 time rate drawbacks (1)
more skilled and less skilled workers get paid same amount of money -> demotivation of better skilled workers
2.1 piece rate benefits (1)
encourages workers to work faster & produce more
2.1 piece rate drawbacks (1)
workers may focus on producing large amount of products and rush their work, impacting quality of products
2.1 what is a salary (2)
- paid monthly
- amount of money paid per year divided/payed in 12 monthly amounts
2.1 salary benefits (2)
- only distributed once a month so less time consuming for HR and finance department
- employer has money in their account for longer than if paying wages -> improve cashflow
2.1 salary drawbacks (2)
- workers may prefer weekly payments
- no payment for working overtime -> demotivating employees
2.1 what is a bonus (1)
lump slump paid to workers when they have worked well/reached a certain target
2.1 bonus benefits (2)
- motivating for employees
- recognition for achievements (supports Maslow & herzberg theories)
2.1 bonus drawbacks (2)
- can become “expected” which disappoints employees if they do not get one
- resentment may occur if some employees get bonuses and others don’t
2.1 what is commission (2)
- payment relating to number of sales made
- more sales employee makes = more money employee made
2.1 commission benefits (1)
motivates employees to sell more products -> increasing sales
2.1 commission drawbacks (2)
- other employees working on commission can pressurise customers to purchase products in order to get their commission -> non-returning customers and negative brand image
- if there is a recession -> sales will be low -> commission hard to achieve
2.1 what is profit sharing (1)
system where a proportion of the company’s profits is paid out to employees in addition to wages/salaries
2.1 non-financial methods of motivation (6)
- fringe benefits
- job rotation
- job enrichment
- team-work
- training
- opportunities for promotion
2.1 what are non-financial awards (1)
focus on increasing job satisfaction
2.1 what are fringe benefits (2)
- perks employers give employees
- non financial rewards
- ex.: discount, company car, gym membership, free lunch
2.1 what is job rotation (1)
swapping around and doing different tasks for a limited time and changing around again
2.1 job rotation benefits (2)
- more work variety -> workers not bored
- if people are in it is easy to cover workers as everyone is skilled to cover jobs
2.1 job rotation drawbacks (1)
- expensive to train all workers in different tasks
2.1 what is job enrichment
looking at jobs and adding tasks that require more skill and responsibility
2.1 job enrichment benefits (1)
workers given more responsibility will make them feel more empowered and trusted which leads to motivation
2.1 job enrichment drawbacks (1)
employees may be unhappy if they have extra work with no extra pay
2.1 what is team-work (1)
using groups of workers and allocating specific tasks and responsibilities to them
2.1 teamwork benefits (1)
better sense of belonging -> increased motivation
2.1 teamwork drawbacks (1)
clashes and arguments can distract from working and impact quality of work
2.1 what is training (1)
process of improving a worker’s skills
2.1 training advantages (2)
- gain sense of achievement from worker -> increased motivation
- employees able to take on new responsibilities -> job enrichment/promotion -> increased motivation
2.1 training drawbacks (1)
expensive
2.1 what are opportunities for promotion (1)
advancement of employee in organization, higher level in hierarchy
2.1 opportunities for promotion benefits (1)
recognition, more work/pay.
2.1 opportunities for promotion drawbacks (1)
conflict may occur if an employee is promoted and another isn’t
