IGCSE Business Studies Notes

• Needs vs. wants — A need is essential for survival; a want improves quality of life. Businesses satisfy wants through goods and services.
• Factors of production — Land, labour, capital, enterprise. Enterprise is the risk-taking skill that combines the other three.
• Sectors of industry — Primary (extraction), secondary (manufacturing), tertiary (services). Most developed economies are tertiary-heavy.
• Business objectives — Survival, profit, growth, market share, customer satisfaction, social objectives. Objectives change as a business matures.
• Stakeholders — Owners, employees, customers, suppliers, government, local community. Conflicts arise when stakeholder aims clash (e.g. profits vs. wages).
• Forms of business organisation — Sole trader (full control, unlimited liability), partnership (shared risk), private limited company (separate legal identity, limited liability), public limited company (can sell shares to the public).

• Organisational structure — Hierarchical (clear chain of command, narrow span of control) vs. flat (wider spans, faster communication, more delegation).
• Recruitment & selection — Job description → person specification → advert → shortlist → interview. Internal recruitment is faster and cheaper; external brings new ideas.
• Training — Induction, on-the-job, off-the-job. Training improves productivity, motivation and quality, but costs time and money.
• Motivation theories — Taylor (money), Maslow (hierarchy of needs), Herzberg (hygiene and motivator factors).
• Leadership styles — Autocratic (fast decisions, low morale), democratic (higher morale, slower), laissez-faire (creative but can lack direction).
• Communication — Downward, upward, horizontal. Barriers include language, jargon, hierarchy, technology and noise.

• Market research — Primary (first-hand: surveys, interviews, focus groups) vs. secondary (existing data). Sampling methods: random, stratified, quota, cluster.
• Market segmentation — Age, income, gender, lifestyle, geography. Helps target the right customers with the right message.
• Marketing mix (4 Ps) — Product, price, place, promotion. Extended mix adds people, process, physical evidence.
• Pricing strategies — Penetration (low price to enter), skimming (high price early), competitive, psychological, cost-plus.
• Product life cycle — Introduction, growth, maturity, decline. Extension strategies (rebranding, new uses, new markets) stretch maturity.
• Promotion methods — Advertising, sales promotion, personal selling, direct marketing, public relations, social media. Choose based on budget, audience and product.

• Production methods — Job (one-off, custom), batch (groups), flow (mass, continuous). Flow gives economies of scale; job gives high margins but low volume.
• Economies of scale — Lower average cost per unit as output rises. Types: purchasing, financial, marketing, managerial, technical, risk-bearing.
• Quality control vs. quality assurance — Control checks at the end; assurance builds quality into every stage (e.g. TQM, Kaizen).
• Stock control — Buffer stock, reorder level, lead time, JIT (just-in-time). JIT cuts holding costs but needs reliable suppliers.
• Break-even analysis — Fixed costs ÷ (selling price − variable cost per unit). Use it to find the output needed to cover all costs.
• Location decisions — Near suppliers, labour, customers, transport links, market. Overseas location may cut costs but adds risk.

• Sources of finance — Internal: retained profit, sale of assets. External: bank loans, overdrafts, share capital, venture capital, debentures, crowdfunding.
• Short-term vs. long-term — Overdrafts and trade credit for working capital; loans and shares for expansion.
• Cash-flow forecasting — Tracks inflows and outflows over time. A negative closing balance means the business may run out of cash even if profitable.
• Profit vs. cash — Profit is revenue minus costs over a period; cash is money available now. A business can be profitable but insolvent.
• Financial statements — Income statement (profit/loss), statement of financial position (assets, liabilities, equity).
• Ratios — Gross profit margin, net profit margin, return on capital employed (ROCE), current ratio, acid-test ratio. Use them to judge performance and liquidity.

• Read the command word first: 'state' wants a fact; 'explain' needs a reason; 'evaluate' needs pros, cons and a justified conclusion.
• Use the case study — apply your answer to the business given, not just general theory.
• For 8-mark questions, structure: point → because → impact on the business → linked conclusion.
• Always define key terms in the first sentence of your answer.
• Watch the time: don't spend 10 minutes on a 4-mark question.
• Use data from the source when the question provides numbers or quotes.

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