Sunday, October 14, 2012


Hello, this is a summary of IGCSE Business Studies to help you understand the its core concepts more easily. As a student, I would like to share with you my experience since I am studying this subject right now. I am not a professional so please feel free to add comments and suggestions on how I should improve.

This study guide is going to be about IGCSE Business Studies, Third Edition by Karen Borrington and Peter Stimpson. For more information, visit this page. All credit goes to the authors.

I hope you will enjoy this study guide and for me to be of help!

Saturday, August 25, 2012

Chapter 1: The purpose of Business Activity

The economics problem: needs and wants.

Basically, all humans have needs and wants. Needs are things we can't live without, while wants are simply our desires that we can live without. We all have unlimited wants, which is true, since all of us want a new PC, a car, new graphics card, etc. that we actually do not need to live. Businesses produce goods and services to satisfy needs and wants.

Although we have unlimited wants, there are not enough resources for everyone. Resources can be split into 4 factors of production, which are:

- Land: All natural resources used to make a product or service.
- Labour: The effort of workers required to make a product or service.
- Capital: Finance, machinery and equipment required to make a product or service.
- Enterprise: Skill and risk-taking ability of the entrepreneur.

Entrepreneurs are people who combine these factors of production to make a product.

Friday, August 24, 2012

Chapter 2: Types of business activity

Levels of economic activity

In order for products to be made and sold to the people, it must undergo 3 different production processes. Each process is done by a different business sector and they are:
  • Primary sector: The natural resources extraction sector. E.g. farming, forestry, mining... (earns the least money)
  • Secondary sector: The manufacturing sector. E.g. construction, car manufacturing, baking... (earns a medium amount of money)
  • Tertiary sector: The service sector. E.g banks, transport, insurance... (earns the most money)

Thursday, August 23, 2012

Chapter 3: Forms of business organisation

Almost every country consists of two business sectors, the private sector and the public sector. Private sector businesses are operated and run by individuals, while public sector businesses are operated by the government. The types of businesses present in a sector can vary, so lets take a look at them.

Private Sector

Sole Traders

Sole traders are the most common form of business in the world, and take up as much as 90% of all businesses in a country. The business is owned and run by one person only. Even though he can employ people, he is still the sole proprietor of the business. These businesses are so common since there are so little legal requirements to set up:
  • The owner must register with and send annual accounts to the government Tax Office.
  • They must register their business names with the Registrar of Business Names.
  • They must obey all basic laws for trading and commerce.

Wednesday, August 22, 2012

Chapter 4: Government and economic influences on business

The impact of business activity on society

All business activity has benefits and undesirable effects on society. These reasons are why governments want to have some control over business activity:

Possible benefits:
  • Production of useful goods to satisfy customer wants.
  • Create employment/increases workers living standards.
  • Introduction of new products or processes that reduces costs and widen product range.
  • Taxes help finance public services.
  • Business earn foreign currency in exports and this could be spent on imports.

Tuesday, August 21, 2012

Chapter 5: Other influences on business

External constraints and constraints on business activity

Businesses cannot survive by neglecting the "real world", which includes influences that forces a business to make certain decisions or constraints that limits or controls actions. External constraints are things that businesses cannot control, these are:
  • Technological change: New products.
  • Technological change: New production processes.
  • Increased competition.
  • Environmental issues.

Monday, August 20, 2012

Chapter 6: Business costs and revenue

Business costs

All business activity involves some kind of cost. Managers need to think about the because:
  • Whether costs are lower than revenues or not. Whether a business will make a profit or not.
  • To compare costs at different locations.
  • To help set prices.
There are two main types of costs, fixed and variable costs. Here are some types of costs:
  • Fixed costs = stay the same regardless of the amount of output. They are there regardless of whether a business has made a profit or not. Also known as overheads.
  • Variable costs = varies with the amount of goods produced. They can be classified as direct costs (directly related to a product).
  • Total costs = fixed + variable costs

Sunday, August 19, 2012

Chapter 7: Business Accounting

What are accounts an why are they necessary?

Accounts are financial records of a firm's transactions that is kept up to date by the accountants, who are qualified professionals responsible for keeping accurate accounts and producing the final accounts.

Every end of the year, a final accounts must be produced which gives details of:
  • Profits and losses made.
  • Current value of the business.
  • Other financial results.
Limited companies are bound by law to publish these accounts, but not other businesses.

Saturday, August 18, 2012

Chapter 8: Cash flow planning

What is meant by cash flow?

Cash is a liquid asset, meaning that i can be spent on goods and services any time. Many business experience cash flow problems, meaning that they do not have enough cash to do what they want to do. Cash flow means "the flow of money in and out of a business". These are ways cash flow can occur:

Cash inflows:
  • Sale of goods for cash.
  • Payment from debtors.
  • Borrowing from a source (but will inevitably lead to cash outflow in the future).
  • Sale of unwanted assets.
  • Investment from investors: shareholders and owners
Cash outflows:
  • Purchasing goods for cash.
  • Payment of wages, salaries and others in cash.
  • Purchasing fixed assets.
  • Repaying loans.
  • Repaying creditors.

Friday, August 17, 2012

Chapter 9: Financing business activity

Why do businesses need finance?

Businesses need finance, or money, to pay for their overhead costs as well as their day to day and variable expenses. Here are three situations when businesses need finance the most:

  • Starting a business: Huge amounts of finance is needed to start a business which requires buying fixed assets, paying rent and other overheads as well as producing or buying the first products to sell. The finance required to start up a business is called start-up capital.
  • Expanding a business: When expanding, a lot of capital is needed in order to buy more fixed assets or fund a takeover. Internal growth by developing new products also requires a notable amount of finance for R&D.
  • A business in difficulties: For example, for loss making businesses money is needed to buy more efficient machinery, or money is needed to cover negative cash flow. However, it is usually difficult for these firms to get loans. 

Thursday, August 16, 2012

Chapter 10: Organisational Structure

What is organisational structure?

Organisational structure refers to the levels of management and division of responsibilities within a business, which could be presented in an organisational chart.

For simpler businesses in which the owner employs only himself, there is no need for an organisational structure. However, if the business expands and employs other people, an organisational structure is needed. When employing people, everybody needs a job description. These are its main advantages:

  • People who apply can see what they are expected to do.
  • People who are already employed will know exactly what to do.

Wednesday, August 15, 2012

Chapter 11: Managing a business

What do managers do?

All organizations have managers. They can come by the name of director, headmaster, etc... but they all perform similar tasks. These tasks are:


Planning for the future involves setting goals for a business. These goals give the business a sense of direction and purpose. Now the whole business will have something to work towards. Managers also need to plan for resources which will be needed. These are only two strategies managers use to keep the business running.

Tuesday, August 14, 2012

Chapter 12: Communication in business

What is effective communication and why is it necessary?

Communication is when a message transfered from one person to another and is understood by the latter. We communicate everyday (by talking, by chatting, by texting, etc.) but we need to learn how to communicate effectively. Effective communication means that:
"The information or message being sent is received, understood and acted upon in the way intended."
In business, ineffective communication or communication failure could result in serious problems. 

Monday, August 13, 2012

Chapter 13: Motivation at work


People work for a number of reasons. Most people work because they need to earn money to survive, while others work voluntarily for other reasons. Motivation is the reason why people work, and it drives them to work better. Therefore, managers try to find out what motivate workers and use them to encourage workers to work more efficiency. This results in higher productivity, increased output, and ultimately higher profits.
  • Nowadays, machinery is more common in businesses which results in increased productivity as well. However, the amount that a well motivated workforce can produce must still be recognised, since employees are a firms greatest assets!

Sunday, August 12, 2012

Chapter 14: Recruitment, Training, and human resources

The work of the Human Resources department


We all know that recruitment and selection is one of the tasks that the HR department fulfills. The other tasks will be discussed below:

  • Recruitment and selection: Involves selecting and attracting the best workers.
  • Wages and salaries: Must be enough to motivate or attract workers.
  • Industrial relations: There must be effective communication between departments.
  • Training programmes: Must meet the training needs of employees and accomplish business objectives.
  • Health and safety: Must do things according to the law.
  • Redundancy and dismissal: Must obey all laws when firing workers.

Saturday, August 11, 2012

Chapter 15: Employee and employer associations

In smaller businesses, if employees have any problems they can talk directly to their employer. However, in larger businesses that employs many people, it becomes extremely hard to do so. It is also hard for the Human Resources department to make decisions when they have about 500 employees (e.g. who will get a pay rise?). It becomes much easier if decisions are negotiated with a trade union, and employee association that represents them. This saves the management a lot of time because they do not have to see individual employees to discuss problems.

Friday, August 10, 2012

Chapter 16: The market and marketing

What is marketing?

A market is where buyers and sellers come together and exchange their products for money. It can be in the streets, on the internet, in shops around the world, etc… Customers and sellers exchange both goods and services for money.

Product-orientated and market-orientated businesses

A product orientated business focuses on the quality and price of the product before finding a market for it to sell in. These type of businesses usually produce basic needs. New technology could be developed this way, and customer wants are created by advertising.

Thursday, August 9, 2012

Chapter 17: Market research

Why is market research needed?

Any business should find out what people want to buy and how many people are going to buy that product before producing a product since the chances of failing are very high. Usually, market research try to answer these questions:

  • What feature of the product do they like/dislike?
  • Are people willing to buy the product?
  • What price are people prepared to pay?
  • Location of the selling point of the product.
  • Type
    of customer who buys the product.
  • Type of promotion that will be effective.
  • Competition in the same industry.

Wednesday, August 8, 2012

Chapter 18: Presentation of information

Presentation of data from market research

Presentation of data is important because it converts raw data into a form that is easier to understand. Information can be displayed as:

Table/tally chart:
It is the most suitable method of presenting data when raw data is needed. However, it offers little more than that and the information should be converted into other forms if it needs to be understood or analysed carefully. It is sufficient for info that is brief or does not contain a lot of different things.

Tuesday, August 7, 2012

Chapter 19: The marketing mix: product and packaging

The role of product in the marketing mix

The product itself is the most important element in the marketing mix. Without it, the other three wouldn't exist. Most companies today are market oriented, and will identify a suitable product for the market before moving on to determine the other 3 elements. Large companies have R&D departments which spends all its time developing new product and analysing the pros and cons of competitors' products.

Monday, August 6, 2012

Chapter 20: The marketing mix: price

The role of price in the marketing mix

When pricing a product, a business needs to choose one that fits with the rest of the elements in the marketing mix. E.g. high price so that consumers thinks they are buying high quality goods, low price for low quality goods, or competitive prices in a market with a lot of competition.

Sunday, August 5, 2012

Chapter 21: The marketing mix: promotion

The role of promotion in the marketing mix
Promotion informs consumers about the rest of the marketing mix. Without it, consumers do not know about the product, the price, or the place. Promotion is more than just advertising, and it includes several activities. It is crucial when you are selling in a mass market or you have a brand name. Promotion includes:

  • Advertisements: They can take different forms, e.g. on TV, in newspapers.
  • Promotion: e.g. Money off coupons.
  • Personal selling: Sending out sales representatives to talk directly to the consumers.
  • Public relations: Involves making the public aware of the company, e.g. creating publicity in the media.

Saturday, August 4, 2012

Chapter 22: The marketing mix: place

The role of place in the marketing mix
After the product, price, and promotion has been decided, the product/service has to be available to the consumer where and when they want to buy. Consumers should be able to get to the product easily, and the product has to be in the right place (e.g. expensive chocolate shouldn't be in a small grocery store) to sell well.

Friday, August 3, 2012

Chapter 23: Factors affecting production

What is meant by production?
Production is the provision of a product to satisfy wants and needs. The process involves businesses adding value to their products. E.g. The production process of matches involve cutting wood into matchsticks, putting phosaphorus ends on them and packaging them to sell.

Thursday, August 2, 2012

Chapter 24: Factors affecting location

Location of industry
The location of a business is considered when it starts-up or when its present location is unsatisfactory. The business's objectives as well as the conditions of the environment change, so the business may need to look for a new location once in a while.

There are many factors that affect the location of businesses, and these factors are different for each business sector. We'll take a look at them below.

Wednesday, August 1, 2012

Chapter 25: Business in the international community

The international dimension
In business, no manager can operate without being affected by the international community.

Exchange rates

Exchange rates is the value of one currency compared to another.

How are exchange rates determined?

There are two type so currencies: