IGCSE Business Exam Guide Ed’s Business Essentials

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IGCSE Business Exam Guide Ed’s Business Essentials

Table of Contents
IGCSE Paper 1 Exam Guide ........................................................................................................... 2
Paper 1 Exam Practice and Solutions ......................................................................................... 4
Business Activity ......................................................................................................................... 4
People in Business ...................................................................................................................... 5
Marketing ..................................................................................................................................... 6
Operations .................................................................................................................................... 7
Finance .......................................................................................................................................... 8
External Influences..................................................................................................................... 9
IGCSE Paper 2 Exam Guides ...................................................................................................... 10
Paper 2 Exam Practice and Solutions ................................................................................... 12
Business Activity ....................................................................................................................... 12
People in Business .................................................................................................................... 13
Marketing ................................................................................................................................... 14
Operations .................................................................................................................................. 15
Finance ........................................................................................................................................ 16
External Influences................................................................................................................... 17
IGCSE Business Studies Assessment Criteria......................................................................... 18
A01 Knowledge .......................................................................................................................... 18
A02 Application ......................................................................................................................... 18
A03 Analysis ............................................................................................................................... 18
A04 Evaluation ........................................................................................................................... 19
Ratio Hack Sheets ............................................................................................................................. 20
Profitability Ratios ........................................................................................................................ 20
Liquidity Ratios.............................................................................................................................. 21
Return on Capital Employed ...................................................................................................... 22
IGCSE Business Command Words ................................................................................................ 22
IGCSE Business Phrasebook........................................................................................................... 24

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IGCSE Business Exam Guide Ed’s Business Essentials

IGCSE Paper 1 Exam Guide

Timing

Paper 1 lasts ninety minutes and has a total of eighty marks. Therefore, you have roughly
one minute per mark, so aim to spend a maximum of two minutes on two-mark questions,
six minutes on six-mark questions and so on.

Structure

There are four questions on Paper 1, each with twenty marks. Each of the four questions
includes a “mini case study,” with information about a fictional business.

Each of the four questions on Paper 1 is split into 5 parts:

Question Marks Command Word

Commonly Used

A 2 Define

B 2 Identify

C 4 Outline

D 6 Explain

E 6 Justify

Total 20

Exam Strategy

Many of the questions only require brief answers to secure all the marks. Keep your
answers clear and concise to allow more time for the more challenging questions.

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IGCSE Business Exam Guide Ed’s Business Essentials

Paper 1 usually has at least one short calculation question. Calculation questions can be
very time-consuming for some students. Be careful not to go over your time limit for
this question. You can always return to finish the calculation question if you have
additional time when you finish all the other questions on the exam.

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IGCSE Business Exam Guide Ed’s Business Essentials

Paper 1 Exam Practice and Solutions

Business Activity

External Growth 6 marks

CGE is a private limited company. CGE has a tall hierarchical organisational structure. It
is a book retailer which plans to take over one of its competitors for $900m. If the
takeover happens, CGE would have 7 500 bookshops across 20 countries. CGE’s
Managing Director said: ‘We expect to reduce total costs by $200m each year after the
takeover. We will stop all off-the-job training of employees.’ The Managing Director
thinks CGE would benefit from becoming a public limited company but some of the
other directors cannot decide if this is a good idea.

Identify and explain one advantage and one disadvantage to CGE of becoming a public
limited company (6 marks)

Advantage: Better access to capital i.e. raising share capital from existing and new
investors to pay for the takeover

Disadvantage: Cannot control who buys the shares so easier to be taken over by other
book retailers

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IGCSE Business Exam Guide Ed’s Business Essentials

People in Business

External/Internal Recruitment

FIT uses batch production to make sugar free energy bars. The products are sold using
several distribution channels. FIT employs 600 production workers. FIT has problems
with many employees leaving. Following the dismissal of the Operations Manager, the
Human Resources Director has to recruit a new manager. She said: ‘The person must
have good communication skills to help solve the communication barriers FIT has with
employees.’ The Human Resources Director has to decide whether to use internal
recruitment or external recruitment for the new manager.

(e) Do you think external recruitment is better than internal recruitment when
recruiting a new manager for a large business? Justify your answer. (6 marks)

No because external recruitment might be more expensive which will increase costs

Yes because the business might have no choice as there may not be suitable internal
applicants. So, there may be no new ideas which could increase efficiency.

Although a higher cost, using external recruitment would be better as it will result in
the appointment of a manager whose cost savings will soon outweigh the cost of
external recruitment, especially in a large business where there is much more
opportunity for cost savings.

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IGCSE Business Exam Guide Ed’s Business Essentials

Marketing

Pricing 6 marks

CHIP makes a range of computer processors that it sells to other manufacturers. The
Managing Director has been looking at CHIP’s income statement. She is worried about
the effects of an increase in the cost of materials. She said: ‘Changes in technology have
improved our production methods. CHIP needs to remain competitive as imports of
computer processors are increasing.’ The Managing Director has to decide whether
CHIP should increase its prices.

(e) Do you think CHIP should increase its prices? Justify your answer. (6 marks)

Yes because this could increase revenue so more money available to cover costs such
as an increase in material costs.

No, because keeping prices low may increase market share because it is a competitive
market as lower price attracts customers.

Although increasing costs may increase revenue, as it is a competitive market with

increasing numbers of imports sales could be sensitive to a change in price.

The decrease in margins due to rising costs of materials may be off set by the
increased efficiency in production.

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IGCSE Business Exam Guide Ed’s Business Essentials

Operations
Technology 6 marks

4. DLI is a private limited company in country X. It owns 135 supermarkets, of which 35

are operated as franchises. One of DLI’s objectives is to expand by opening 30 more
shops in the next 18 months. The Managing Director said: ‘Market research shows that
fewer people are going to the local markets every day to buy their food. It is important
for us to set prices at the right level.’ The Managing Director is thinking about whether
to introduce new technology into the business.

(d) Explain two factors DLI should consider when deciding whether to introduce new
technology into its business. (6 marks)

Factor 1: Cost of technology

Explanation: as DLI has 135 locations which they may not be able to afford to
introduce the technology in all supermarkets

Factor 2: What efficiency gains will there be?

Explanation: Technology with lower average cost so DLI can lower the prices of its
food

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IGCSE Business Exam Guide Ed’s Business Essentials

Finance
Cash Flow 6 marks

2. Fernando is a sole trader. He provides painting and decorating services to business

customers. His business does not benefit from any economies of scale because it is
small. Fernando has to pay his suppliers within 2 months. However, he gives customers
4 months to pay. Fernando uses an old van he has borrowed from his father to travel to
his customers’ offices and shops. As the van often breaks down, Fernando is thinking of
buying a new van.

Do you think asking customers to pay more quickly is the best way for a small business
to improve its cash flow? Justify your answer. (6 marks)

(e) Yes because there will be no need to borrow so no interest paid so does not
increase cash outflows

No, because customers may be unable or unwilling to pay more quickly so may look
for alternative suppliers so reducing cash inflows.

As the business is small, it may be better to ask suppliers for more time to pay as the
business may not have many customers so does not want to risk losing them by
asking them to pay more quickly

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IGCSE Business Exam Guide Ed’s Business Essentials

External Influences
Exports 6 marks

ABB makes a range of paints. It exports 60% of its products. The Managing Director has
been Looking at ABB’s cash-flow forecast. He said: ‘Success is not just about our return
on capital employed.’ The Managing Director is worried about the introduction of new
legal controls to protect the environment. This will mean ABB will have to reduce the
number of chemicals that are used to make paint. He thinks these new legal controls
will be bad for business.

Identify and explain two possible problems for ABB when exporting its products. (6
marks)

Problem 1: Different tastes

Explanation: different countries might prefer different paint colours adding to

production costs

Problem 2: Effect of exchange rates

Explanation: as an appreciation in own currency would mean its products are more
expensive so not able to export as much as 60%

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IGCSE Business Exam Guide Ed’s Business Essentials

IGCSE Paper 2 Exam Guides

Timing

Paper 2 lasts ninety minutes and has a total of eighty marks. That means you have got
roughly one minute per mark. Aim to spend a maximum of eight minutes on the eight-
mark part ‘A’ questions and twelve minutes on the twelve-mark part ‘B’ questions.

Structure

There are four questions in total on Paper 2. Usually, each question is split into two, with
an eight-mark part ‘A’ question and a twelve-mark part ‘B’ question.

Question Marks Command Words

A 8 Explain

B 12 Consider, justify

Total 20

Exam Strategy

The biggest difference between Paper 1 and Paper 2 is the allocation of marks for
knowledge, analysis and evaluation. Paper 2 has less focus on assessing knowledge and
has a higher allocation of marks for analysis and evaluation.

Instead of four small “mini” case studies, you will receive a separate booklet with a longer
case study about one fictional business.

Therefore, allow yourself around five to ten minutes to read the case study and underline
the key points before you start answering questions. You can also have a quick look at
the questions, so you know what to focus on when reading the case study.

It can be helpful to have a mental checklist of questions you ask in every case study. For
example:

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IGCSE Business Exam Guide Ed’s Business Essentials

“What are the business’ objectives?”

“What is the size of the business?”

“Is the business in a growth market?”

This will enable greater focus on the most important issues facing the business and lead
you to refer to the case study throughout your answers.

You will usually have at least one question where you will be asked to analyse financial
information using calculations and make a decision, often between two options for a new
product or service. Many students find calculation questions more challenging and time
consuming, so you may prefer to complete this question last.

⭐⭐⭐Top Tip Paper 2 ⭐⭐⭐

Remember to keep referring to the case study in your answers. As students reach the
final questions, they often forget to apply their answers to the case study and miss out
on vital marks.

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IGCSE Business Exam Guide Ed’s Business Essentials

Paper 2 Exam Practice and Solutions

Business Activity

Stakeholders 8 marks

Identify and explain how the following two stakeholder groups might be affected by BA’s
plans to expand.

Shareholders
The cost of expansion is $12m and they might be asked to provide share capital. This
could reduce the market price of their shares in the soap company as it will take time
for the new investment to lead to higher profits and possibly higher dividends.

Local Community
May benefit as 30 more production workers will be employed which will reduce com-
munity unemployment. This will mean there will be more money from the workers
wages going into the local economy and local businesses will have more demand and
higher profits too.

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IGCSE Business Exam Guide Ed’s Business Essentials

People in Business

Leadership Styles 12 marks

Consider three leadership styles the operations manager could use in the new factory.
Recommend which leadership style should be used to improve decision-making. Justify
your answer.

Leadership Style 1 Autocratic leadership style will lead to clear instructions being
given by the manager. This means production workers will always know what to do
and know what is expected of them. However, they will not feel they can contribute
or make any comments if they feel something could be improved.

Leadership Style 2 Democratic leadership style will mean the 100 production workers
will be consulted on decisions, thus improving motivation among the staff. However,
decisions will take longer to make so it may lead to delays in the expansion to the new
factory.

Leadership Style 3 Lassiez faire gives nearly all responsibility to the workers in the
soap factory production line. Some workers may find this motivating as they have
much more control over decision-making. Some workers may find it stressful if there
are no clear lines of authority, especially when the business is moving to produce new
niche products.

Recommendation Autocratic may lead to the operations manager not receiving im-
portant information about how the production line in the new factory is working as
communication is one way, leading to bad decisions. Lassiez faire will mean the oper-
ations manager has very little control over decision-making in producing the new
products. LF is only suitable for highly skilled workers. Democratic will allow the op-
erations manager to get feedback on how the new factory is working from workers so
she/he can deal with problems quickly and make decisions based on high-quality in-
formation, improving the efficiency of the new factory in the long term.

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IGCSE Business Exam Guide Ed’s Business Essentials

Marketing

Niche Marketing 8 marks

Identify and explain one advantage and one disadvantage to BA of starting to sell new
products in a niche market.

Advantage can sell specialist products that meet these specific customer needs

Explanation and SA want to sell shampoo aimed at people with older hair, so there
are likely to be few competitors in this market as it is smaller and less attractive for
larger businesses making it easier to have a higher market share and higher profits. .
As incomes are increasing in country Z, older people will be able to afford this soap.

Disadvantage Less benefit from economies of scale

Explanation SA currently use flow production for their mass-market shampoo, but
they will use batch production for the medicated shampoo, which will lead to an in-
crease in unit costs and possibly less profits.

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IGCSE Business Exam Guide Ed’s Business Essentials

Operations
Lean Production 8 marks

Identify and explain two ways BA could use lean production in its factory.

Way 1 Just in Time

Explanation means that inventory is reduced to no or very low levels held in storage.
This reduces the need for having warehouse space to hold the ingredients to make
shampoo. BA will need to have good relationships with its suppliers to ensure that the
flow production line is not interrupted by inventory running out.

Way 2 Kaizen

Explanation BA meaning “constant improvement” by using Kaizen in flow production

of mass-produced shampoo workers will feel more motivated and it will also reduce
waste and costs leading to higher profits.

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IGCSE Business Exam Guide Ed’s Business Essentials

Finance
Break Even Point

Identify four ways break-even analysis can be useful to a business.

Way 1: Predicts how many sales the business needs to make to break-even

Way 2: Predicts how much sales could fall by and still make a profit

Way 3:Shows potential profit/loss for the business at different levels of output

Way 3: Shows possible effect of change in price on the break-even level of out-
put/profit

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IGCSE Business Exam Guide Ed’s Business Essentials

External Influences
Globalisation 8 marks

a) Identify and explain two opportunities and two threats for businesses in country Y
from globalisation.

Opportunity 1 Access to global markets

Explanation so potential for higher sales

Opportunity 2 Access to reduced labour costs

Explanation and if businesses move production to another country they can may be
able to reduce production costs

Threat 1 Increased competition

Explanation Multinational companies may enter country Y and force lower prices
meaning lower profits and lower market share

Threat 2 susceptible to global shocks

Explanation a recession in another country may spread to Country Y and effect con-
sumer spending reducing business profits

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IGCSE Business Exam Guide Ed’s Business Essentials

IGCSE Business Studies Assessment Criteria

Students of IGCSE Business Studies often make the assumption that getting the highest
mark will just require a basic idea of how business works and a vague recollection of the
key concepts in the syllabus. However, to gain top grades in IGCSE Business Studies
students need to know the precise criteria that examiners are looking for in each
question. Here I will guide you through each of the assessment criteria and give simple
tips on how to maximise your marks.

A01 Knowledge

Knowledge is the foundation of each question and makes up 40% of your final grade.
Therefore, it is essential to have a secure knowledge base of all the key words and
concepts on the syllabus. It can be very helpful to learn a short definition and example
for each of the key words on the syllabus. This will mean you can quickly get the marks
on the paper 1 definition questions, allowing you more time on the more difficult
questions.

A02 Application

Application is all about referring explicitly to the business context in your answers and
makes up 20% of your final grade. Each of the exam questions on both paper 1 and
paper 2 will be based on a fictional business. Application marks are awarded for using
information specific to this business in your answer. For example, in a question about a
restaurant it could be as simple as referring to staff as cooks or waiting staff, rather
than employees. Students often forget to keep referring to the business in their
responses, and often miss out on marks as a result. It can be really helpful to underline
the key words specific to the business as you read the case study. As you answer each
question, briefly go back and review the information about the business, and pick an
issue or detail about the business to include in your answer.

A03 Analysis

Analysis is 25% of your final grade. It is all about explaining the impact of a problem or
an issue on the business. Students often lose marks here because they don’t make it
clear to the examiner why a business decision will have a positive or a negative impact.
In order to explain clearly it can help to use sentence starters like “this means that” or

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IGCSE Business Exam Guide Ed’s Business Essentials

“this will impact the business positively because”. Remember to tie your analysis to to
the specific business in the question so you stay focused on the most important issues
and also to gain application marks.

A04 Evaluation

As evaluation is the final 15% of your grade, and can be the most difficult of the
assessment criteria it is often neglected by students. However, perfecting your skills of
evaluation can often make the difference between a B and an A or A*. Evaluation is
about making a business decision and justifying why you have made that decision. The
crucial component that students often miss, is explaining why one option is better than
the other option. A good way of ensuring you get full evaluation marks is to
acknowledge the benefits of the option you decide not to choose, and then explain why
the benefits of the other option you have chosen are greater. For example : “Although
option A has a lower short term cost, option B will rapidly increase revenue and allow
greater profitability in the long term”.

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IGCSE Business Exam Guide Ed’s Business Essentials

Ratio Hack Sheets

Profitability Ratios

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IGCSE Business Exam Guide Ed’s Business Essentials

Liquidity Ratios

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IGCSE Business Exam Guide Ed’s Business Essentials

Return on Capital Employed

IGCSE Business Command Words

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IGCSE Business Exam Guide Ed’s Business Essentials

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IGCSE Business Exam Guide Ed’s Business Essentials

IGCSE Business Phrasebook

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