Summary Of Cambridge IGCSE Business Studies

Summary of

Cambridge IGCSE
Business Studies
By : Mr. Hamada Bekhit
+965 66612643 Kuwait

1
Mr. Hamada Bekhit Tel: +965 66612643 Kuwait
Summary Of Cambridge IGCSE Business Studies

Summary of Cambridge IGCSE Business Studies

Chapter 1
Business activity

Business activity: is the process of producing goods and services to satisfy

consumer demand.

Needs: are the basic goods or services essential for living.

Ex: water, clothing, food, housing (shelter) or protection.

Wants : are goods or services which people would like to have but is not
essential for living. Wants are unlimited.
Ex : T-Shirt ,Car , Iphone , Laptop, Pizza ………

Economic Problem
: is when customers have unlimited wants but the businesses have limited
factors of production (resources) to produce goods which causes scarcity.

Unlimited
Wants
+ + = =
Limited
Resources
Scarcity

Scarcity: is when there are no enough factors of production to meet the wants
of the population.

Factors of production
are the resources needed to produce goods or service. (in limited supply.)
Factors of production

1. Land 4. Enterprise
2. Labor 3. Capital
are the natural the skill or ability to
Workers, man-made
recourses have risk.
People. resources
provided Enterpreurs :
(anything made by
by nature. are people who
people).
Ex : oil, land, take risk (owners)
Ex : Money.
gas
Machinery,
Equipment, ……….

2
Mr. Hamada Bekhit Tel: +965 66612643 Kuwait
Summary Of Cambridge IGCSE Business Studies

Opportunity Cost:
is the next best second alternative given up by choosing another item.

Schools Roads
Ex:The government has limited resources and should build:
It chose to build schools then roads is the opportunity cost.

Specialization and division of labour

Specialization
: is when the business is specialized in producing a specific product or few
products.

Ex: - Mercedes Company is specialized in producing cars.

- Some restaurants are specialized in Pizza like Pizza Hut, Papa Jones…

Division of labor
: is when the production process of the product is split up into different tasks
and each worker does one specific task.

3
Mr. Hamada Bekhit Tel: +965 66612643 Kuwait
Summary Of Cambridge IGCSE Business Studies

Ex: Cutting Wood

One worker for cutting wood, one for assembling the tables, one for polishing
tables and one for delivering furniture.

Ex : cake
One worker for making dough, one baking the cake in the oven, one for wrapping
the cake and one for selling the cake.

Adv. Dis.
+ Workers will be more efficient - Workers get bored because they do
1.
(trained). the same job every day.
- If one worker is absent and no one
2. + increase workers productivity else can do the job, production might
be stopped.

Types of goods :
1. consumer goods:
: products which are sold to the final consumer. They can be touched, for
example computers and food.

2. Consumer services:
: non-tangible products such as insurance services, transport.

3. Capital goods
: physical goods such as machines and delivery vehicles, used by other business
to help produce other goods and services
4. capital service :
: services such as cleaning services offered for other businesses to help other
business.

4
Mr. Hamada Bekhit Tel: +965 66612643 Kuwait
Summary Of Cambridge IGCSE Business Studies

Adding value:
Added value: is the decoration or everything that the business adds to the
product to make it more desirable, attractive and make the price higher.

: is the difference between the selling price and the costs .

Ex : adding colors ,flavor, picture, names,….to a cake.

Ways of increasing added value :

1. Branding :
: when the business have a strong name e.g. Coca-Cola, Sony ….
Brand name companies charge higher prices.

2. Excellent service quality:

Businesses providing a high quality, personalized service, usually charge higher
prices.

3. Product features:
Product that have more features and functions than similar products on the
market will allow the producer to charge a higher price.

4. Convenience: (put the product in the right location for customers)

Many consumers are ready to pay higher prices if the product in the right place
and save their time.

5
Mr. Hamada Bekhit Tel: +965 66612643 Kuwait
Summary Of Cambridge IGCSE Business Studies

Chapter 2
Classification of business
Stages of economic activity

1-primary stage:
: is extracting and using raw materials
(natural resources).
Ex: farming, mining, fishing, foresting,
oil drilling.

2-Secondary stage:
: manufacturing, making, assembling, building
construction, baking using raw materials provided
by primary stage ……
Ex: Furniture, cars manufacturing ,oil refinery,
baking, building construction, air craft making,
computer assembly.

3-Tertiary stage:
: providing services to customers.
Ex: Transport, banking, insurance, hotels,
hairdressing, travel agents, catering, delivery
company.

The chain of production:

: producing goods involve activities from primary, secondary and territory
sector businesses. each sector depends on each other.

- In developed countries, most workers work mainly in territory stage. People

have higher income and higher standard of living.
- In developing countries usually work in primary and secondary stage.
- Workforce employed in tertiary activities increased due to economic
development and decentralization.

 Industrialization: moving from the primary sector to the secondary sector.

 De-industrialization: moving from the secondary sector to the tertiary
sector.

6
Mr. Hamada Bekhit Tel: +965 66612643 Kuwait
Summary Of Cambridge IGCSE Business Studies
Market Economies

1-Free Market Economy (market economy)

: no government, all business are owned by private sector.
Adv Dis
3. Consumers have a lot of choices No Government plan.
Government doesn't provide
High motivation for workers
4. important services like health care
(high efficiency).
and education.
Competition between companies Monopoly may occur. Prices may
5.
may keep prices lower. increase.
New businesses are encouraged Not all products will be available for
6.
to set up. everybody, especially the poor.
7. no taxes .
Monopoly :is when a business controls the market for a product (no other alternatives).

2-Command Or Planned Economy

No private sector, all business owned by public sector.
Adv Dis
1. Work for everybody. Customers don’t have many choices.
2. Cheaper prices. Low efficiency (quality).
3. Needs are Available for everybody. Workers don't work hard.

3-Mixed Economy
: a market has both public sector and private sector.

Private sector;
: is businesses owned by people individuals. It mainly aims to get profit.

public sector;
: is businesses owned by gov. It mainly aims to give service to community.

Private sector Public sector

What to produce Consumers choices Gov. decides
How to produce Lowest costs to make more profit Gov. decides
For whom to produce Consumers buying power Gov. decides

7
Mr. Hamada Bekhit Tel: +965 66612643 Kuwait
Summary Of Cambridge IGCSE Business Studies

Chapter3
Enterprise, business growth and size
1-Enterprise and entrepreneurship
Entrepreneur: is an individual who has an idea for a business takes the financial
risk of starting and managing new business.

Adv. Of being an entrepreneur Dis. Of being an Entrepreneur

Independence risk – he may lose.
able to put own ideas into practice. Capital – he uses his own money.
may become famous and successful. Lack of knowledge and experience.
may be profitable higher than working Opportunity cost – He losses the income of
as employee. being an employee of another company
use his personal interests and skills.

Entrepreneurs usually :
- have new idea.
- are prepared to invest their own savings.
- accept the risk of failure.
- ready to make all decisions.

Characteristic of successful entrepreneur

1. Innovative create new ideas.

2. Self-motivated and determined enthusiastic

3. Risk taker Ready to take risk.

4. Multi-skilled have many skills.

5. Self confident Have strong belief in their own ability.

6. Leadership qualities Good communication skills, planning ….

7. initiative have new ideas and achieve it.

8. Good at networking Prepared to learn from others.
9. Result driven Focus on achieving results.

8
Mr. Hamada Bekhit Tel: +965 66612643 Kuwait
Summary Of Cambridge IGCSE Business Studies
A business plan
A business plan: a detailed written document outlining the aim of a business to
persuade investors to finance the business.is a document containing the
business.

contents of Business plan:

- The business objectives. - financial forecast
- the business opportunity - The profit
- Finance. - The costs
- Owners - The market

Benefits of a business plan:

1- persuades investors and lenders to provide finance to the business.
2- helps planning and make the best use of resources.
3- provides the business with targets.
4- help understand the costs and risks.

A start-up business:
A newly formed business. They usually start small, but some might grow to
become much bigger.

Why governments support business start-ups?

- reduce unemployment.(create jobs) - increase competition.
– more choices.(increase product variety) - increase the output.
- offer specialist and personal service. - benefit society.
- can grow in the future and become large company.

What support do governments often give to start-up businesses?

1. grants 7. Low interest loans.
2. subsidies 8. Rent-free premises.
3. low taxes
5. Free or subsidized training workers.
6. information, advice, research, and support.

Compare the Size of Business

1- number of employees. 2- market share .
3-value of sales . 4- capital employed

9
Mr. Hamada Bekhit Tel: +965 66612643 Kuwait
Summary Of Cambridge IGCSE Business Studies

Why do owners often want their businesses to grow?

- increase profit. - lower costs.
- increase market share. - more status and prestige.
- gain economies of scale - reduce risk
- protection from the risk of take over.
- greater power to control the market.

Why do some businesses stay small?

1- Owners’ choice:
- the owner doesn’t want workload of a large business.
- the owner wants to keep control.
- the owner doesn’t want to take too much risk.
- the owner wants to keep close relationship with costumers and
provide a personal service.

2- Access and availability of capital:

3- Market domination:
Some industries are dominated by large businesses and it is very
difficult for small business to compete.

Why do some businesses fail ?

1- poor planning and lack of objectives.
2- poor cash management.
3- poor choice of location.
4- poor management.
5- failure to invest in new technology.
6- poor marketing.
7- lack of finance.
8- competition.
9- economic influences.

10
Mr. Hamada Bekhit Tel: +965 66612643 Kuwait