O–Level Business Studies Notes Article # 121
Features: Sufficient for excelling at both Paper 1 and Paper 2. Complete course outline, paper pattern with concerned percentages Concise yet comprehensive enough to be used as a quick revision guide. Important topics discussed in greater detail to cater syllabus requirements.
Author:
Shahraiz Chishti Learning Alliance, Lahore Alma, G.H.A
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Title
Business Studies O-Level Notes
Author
Shahraiz Chishti Cell: +92 321 5555731
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Preface The book has been written for students of IGCSE/ O levels Business Studies. The book covers the whole syllabus and is written in a concise manner. The book can be used as a primary text for covering the syllabus and at the same time can be used as revision text as it is written in a concise manner. The language used is simplistic so that students of all backgrounds/language ability can engage with the content of the book. Exam questions are not present in this book so it is highly suggested that students solve Past Papers to understand the paper pattern.
About the Author The Author Mr Shahraiz Javed Chishti completed his MBA/BBA in Marketing and media with minor in social sciences from LSE and did his O levels from Aitchison College Lahore. The author has been a renowned teacher of O/A Levels Business, Commerce and Social Sciences. He has not only been a teacher but a debates coach as well. He has coached parliamentary debates and Model United Nations to multiple schools and was also the Co-Coach for the Pakistan team that went to the World Schools debating championship held at Stuttgart Germany. In his university he himself was an excellent public speaker who represented Pakistan in multiple competitions held in Germany, Malaysia, India, Macau, Thailand and Philippines.
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CONTENTS CONTENTS .................................................................................................................... 1 ACKNOWLEDGEMENTS ............................................................................................... 6 Syllabus ......................................................................................................................... 6 Paper Pattern................................................................................................................. 7 Ch: 1 & 2 Business Activity and Types of Businesses............................................... 9 Needs ...............................................................................................................................9 Wants ...............................................................................................................................9 Factors of productions:......................................................................................................9 The economic problem:.....................................................................................................9 Opportunity cost: ...............................................................................................................9 Specialization ....................................................................................................................9 Goods vs. Services .........................................................................................................10 Private sector activities ...................................................................................................10 Public ownership .............................................................................................................10 Privatization: ...................................................................................................................10 Ch: 3 Enterprise, Business Growth and Sales .......................................................... 12 Enterprise and Entrepreneurship Entrepreneur ...............................................................12 Characteristic of successful entrepreneurs......................................................................12 Why should governments support business startups ......................................................12 Value of sales .................................................................................................................13 Which method should you choose?.................................................................................13 Ch: 4 Types of Business Organizations .................................................................... 16 Private Sector .................................................................................................................16 Partnership .....................................................................................................................16 Private Limited Companies .............................................................................................17 Public Limited Companies ...............................................................................................17 Co-operatives .................................................................................................................18 Close Corporations: ........................................................................................................18 Joint ventures .................................................................................................................19 Franchising .....................................................................................................................19 Public Sector ...................................................................................................................19 Municipal enterprises ......................................................................................................20 Ch: 5 Business Objectives and Stakeholders Objectives ........................................ 22 Business objectives ........................................................................................................22 Stakeholder Groups ........................................................................................................23 Ch: 6 Motivation Theories .......................................................................................... 25
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Motivation .......................................................................................................................25 Motivation Theories .........................................................................................................25 F.W. Taylor .....................................................................................................................25 Maslow ...........................................................................................................................25 Herzberg .........................................................................................................................26 McGregor ........................................................................................................................26 Why do people work?......................................................................................................26 Wages ............................................................................................................................27 Motivating factors - non-financial motivators ...................................................................28 Job satisfaction: ..............................................................................................................28 Job rotation: ....................................................................................................................28 Job enlargement: ............................................................................................................28 Job enrichment: ..............................................................................................................29 Autonomous work groups or team-working: ....................................................................29 Leadership ......................................................................................................................29 Formal and informal groups ............................................................................................30 Formal groups in business ..............................................................................................30 Informal groups in business ............................................................................................30 Ch: 7 Organizational Structure .................................................................................. 32 Delegation.......................................................................................................................32 Functional departments...................................................................................................34 Decentralisation ..............................................................................................................35 Role of Managers............................................................................................................35 Trade Unions ..................................................................................................................35 Ch: 8 Recruitment, Training and Human Resources ................................................ 38 Recruitment and selection ...............................................................................................38 Job Analysis and Description: .........................................................................................38 Job specification .............................................................................................................39 Advertising the vacancy ..................................................................................................39 Internal recruitment .........................................................................................................39 External recruitment ........................................................................................................39 Job advertisement...........................................................................................................40 Applications forms and CVs/rĂŠsumĂŠs..............................................................................40 Interviews........................................................................................................................40 Rejecting unsuccessful applicants...................................................................................41 Workforce planning .........................................................................................................42 Dismissal and Redundancy .............................................................................................42 Ch: 9 Communication in Business ............................................................................ 44
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Formal Communication ...................................................................................................44 Informal Communication .................................................................................................44 Methods ..........................................................................................................................44 Motivation and Communication .......................................................................................45 Effective communication .................................................................................................45 Barriers to Successful Communication ............................................................................45 How to Improve Communication .....................................................................................45 Grapevine .......................................................................................................................46 Direction of communication .............................................................................................46 Ch: 10 Marketing ......................................................................................................... 48 What is marketing? .........................................................................................................48 Product-orientated and market-orientated businesses ....................................................48 What is marketing ...........................................................................................................48 The Marketing department ..............................................................................................48 The objectives of marketing ............................................................................................48 SWOT analysis ...............................................................................................................48 Market segments ............................................................................................................49 The marketing mix ..........................................................................................................49 Four C’s: .........................................................................................................................49 Ch: 11 Market Research ............................................................................................. 51 Why is market research needed? ....................................................................................51 Primary research.............................................................................................................51 Ch: 12 Marketing Mix Product .................................................................................... 56 Product ...........................................................................................................................56 Types and classification ..................................................................................................56 Development phase ........................................................................................................56 Ch: 13 Pricing Strategies ............................................................................................ 59 Price Elasticity of Demand ..............................................................................................59 Cost-plus Pricing Strategy ...............................................................................................60 Ch: 14 Promotions ...................................................................................................... 62 Promotion .......................................................................................................................62 Legal and other constraints ..........................................................................................62 Internet ...........................................................................................................................63 Ch: 15 Place ................................................................................................................ 65 Channel of Distribution ....................................................................................................65 Agents ............................................................................................................................65 Retailer .........................................................................................................................65
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Ch: 16 Marketing Strategy .......................................................................................... 68 Legal constraints on marketing .......................................................................................69 Ch: 17 Production ....................................................................................................... 71 Operations department: ..................................................................................................71 Stock control and inventory control .................................................................................72 Lean Production Techniques...........................................................................................72 Kaien ..............................................................................................................................73 TECHNOLOGY IN BUSINESS .......................................................................................73 Ch: 18 Break Even and Business Costs .................................................................... 76 Costs ..............................................................................................................................76 Break Even Analysis .......................................................................................................76 Ch: 19 Quality .............................................................................................................. 80 What is quality.................................................................................................................80 Quality Control ................................................................................................................80 Quality Assurance ...........................................................................................................80 TQM (Total quality management) ....................................................................................80 Ch: 20 Factors Affecting Location ............................................................................. 82 Factors affecting the location of a manufacturing business .............................................82 Factors affecting the location of a retailing business .......................................................82 Factors that influence a business to relocate either at home or abroad ...........................83 Factors affecting the location of a service sector business ..............................................83 Roles of legal control.......................................................................................................84 Ch: 21 Financing Activities ........................................................................................ 86 Working Capital...............................................................................................................86 External Sources of Finance ...........................................................................................86 Other Sources of Finance
 .............................................................................................87 Factors Influencing Choices of Finance ..........................................................................87 Ch: 22 Cash Flow ........................................................................................................ 90 Cash Flow Statement ......................................................................................................90 Limitations of Cash Flow .................................................................................................90 Causes of Cash-Flow Problems ......................................................................................90 Increase cash inflows
 ....................................................................................................91 Ch: 23 & 24 Income Statement and Balance Sheet................................................... 93 Income Statement ...........................................................................................................93 Assets .............................................................................................................................93 Trade Receivables (Debtors) ..........................................................................................93 Accounts/Trade Payable (Creditors) ...............................................................................94
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Goodwill ..........................................................................................................................94 Ch: 25 Ratio Analysis ................................................................................................. 96 Profitability ......................................................................................................................96 Liquidity...........................................................................................................................96 Ch: 26 Government and Economic Influences on Business ................................... 98 Government economic objectives: ..................................................................................98 Low inflation: ...................................................................................................................98 Low levels of unemployment: ..........................................................................................98 Economic growth ............................................................................................................99 Balance of payments.......................................................................................................99 Fiscal Policy .................................................................................................................. 103 Monetary policy ............................................................................................................. 104 Ch: 27 Environment and Ethics ............................................................................... 106 Externalities .................................................................................................................. 106 Ch: 28 Business in the International Economy....................................................... 109 Globalization ................................................................................................................. 109 Points for globalization .................................................................................................. 109 Multinational company .................................................................................................. 109 References ................................................................................................................ 111
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ACKNOWLEDGEMENTS Knowledge is not created it is discovered. In this journey of discovery many individuals guide and help you. Therefore I would like to thank my family and friends who have provided constant support. My teachers and colleagues have greatly augmented my skills skills as a person and a writer and I would like to show my gratitude by thanking them.
Syllabus
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Paper Pattern
O-Level Business Studies Notes
8
Business activity and types of businesses
Syllabus 2017 – 2019
O-LEVEL
–
Needs
–
Wants
–
Factors of productions
Business
–
The economic problem
–
Opportunity cost
Studies
–
Specialization
–
Goods vs. Services
–
Private sector activities
–
Public ownership
–
Privatization
Business Activity and Types of Businesses
Shahraiz Chishti MBA Cell: 0321 5555731
O-Level Business Studies Notes
9
Business activity and types of businesses
Ch: 1 & 2 Business Activity and Types of Businesses Needs – –
Essential goods or services necessary for living. Satisfy the basic things for life.
Wants – –
Non-essential goods and services that people would like to have. Interests & Tastes
Factors of productions: There are four factors of production (Inputs for a business). Land: All natural resources provided for the business plus the physical land the business is located on. Either rent is paid on land or land is purchased. Labor: The people that work for the business on a wage or salary. Capital: All investment and finance for machinery. Enterprise: All people that have skills & have risk-taking ability and combine other factors of production to produce good or service. They benefit if a profit is made by the business.
The economic problem: Limited resources and unlimited wants, which gives birth to scarcity and opportunity cost.
Opportunity cost: The next best alternative forgone. The aim of a business in the private sector is to survive by making a profit. This may be a sole trader working alone, like a newsagent, or thousands of shareholders in a large Public Limited Company. Businesses gain a larger market-share [percentage of your company sales / industry sales] by increasing the sales of their products against competitors. This may involve reducing prices. Customer loyalty and repeat sales are essential. Customers returning to buy the product from the same business], businesses need to be reliable and provide a quality service to their customers.
Specialization In pre Industrial societies there was no specialization (one person doing one job). Now majority of businesses use specialization and division of labor.
O-Level Business Studies Notes
Advantages Specialized task training Increases efficiency Increases output Save time
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Business activity and types of businesses
Disadvantages Bored workers Possible drops in efficiency Production stopped due to absence
Goods vs. Services Goods (Shampoo, soap, laptops etc.) are tangible and services (hair dressing) are intangible. Added value: Price – cost of materials. Can be increased by a price increase which leads to less customers buying the product or by a decrease in cost of materials which can decrease quality.
Private sector activities The activities of industry can be divided into stages - primary, secondary and tertiary production. These stages form the chain of production and provide consumers with the finished goods. Primary production This involves acquiring raw materials. For example, metals and coal have to be mined; oil drilled from the ground; rubber tapped from trees; foodstuffs farmed, and fish trawled. This is sometimes known as extractive production. Secondary production Is the manufacturing and assembly process. This involves converting raw materials into components, assembling the product, e.g. building houses, bridges and roads. Tertiary production This refers to the commercial services that support the production and distribution process, e.g. transport, advertising, warehousing and retail, insurance, teaching and health care.
Public ownership Business that are owned by the government are public sector businesses. Examples of this in Pakistan are WAPDA. Advantages Disadvantages Government provides services that may be There is no profit motive so efficiency loss-making services as the main aim of the may fall. government is to provide a service rather than make a profit.
Privatization: When a government owned business is sold of to the private sector. The benefit of this is that efficiency may increase but usually at the cost of job losses and closing of loss making services that may have been essential. There are three types of economies Command, free market and mixed economy.