Business Studies UK-IGCSE

Question 1

What are the three classifications of businesses?

Answer 1

-Primary Sector
-Secondary Sector
-Tertiary Sector

Question 2

Poor countries tend to have high __________ sector activity, while richer countries tend to have higher ______________ sector activity.

Answer 2

primary,tertiary

Question 3

Define the term industrialisation

Answer 3

The growing importance of the secondary sector in businesses, reducing the importance of the primary sector.

Question 4

Define the term de-industrialisation

Answer 4

The importance of the secondary sector dwindles in favour of the tertiary sector

Question 5

How does ‘a change in consumer behaviour’ increase the production of the tertiary sectors?

Answer 5

Higher incomes allow consumers to afford more products. This can shift the balances to the favour of the tertiary sector, as that is where goods are typically exchanged

Question 6

How does ‘better education’ increase the production of the secondary/primary sectors?

Answer 6

As people become more educated, they expect higher quality products. This ramps up the production of the secondary and primary sectors

Question 7

How does ‘more leisure time’ increase the production of the tertiary sector?

Answer 7

More leisure time means that more people will be willing to buy their wants. This will boost leisure activities, which are typically in the tertiary sector.

Question 8

How can the changing importance of business classifications be due to a change in business behaviour?

Answer 8

-The need for finance to fund expansion, allowing the business to grow larger
-The need to be able to communicate internally and externally
-They need to provide better service for employees, tipping the scales in favour of the goods and services of other businesses

Question 9

The private sector is associated with ___________ firms (businesses) that aim to make a profit, while the public sector is associated with the ____________. (No need to know the aim of public sectors)

Answer 9

individual, government

Question 10

In a/n _____________________ there are both; private and public sectors.

Answer 10

Mixed economy

Question 11

What are the organisations in a mixed economy for both, private and public sectors?

Answer 11

Private Sector: Sole Traders, Partnerships, Limited Companies, Franchises
Public Sector: Government departments, Public corporations, nationalised industries

Question 12

What does the public sector make its decisions in favour of?

Answer 12

Makes decisions based on what is better for the country

Question 13

When people are not able to afford the goods from the public sector, what happens?

Answer 13

Prices are reduced or straight up eliminated

Question 14

What are entrepreneurs?

Answer 14

The risk takers that are the foundation of every business

Question 15

What characteristics are in an Entrepreneur?

Answer 15

-They are innovative (constantly finding and improving new ideas)
-They are determined (They set a goal and follow upon it)
-They are confident (They don’t give up and they believe in themselves)
-They have good communicating skills and can motivate others and make decisions (leadership qualities)

Question 16

What are the contents of a business plan?

Answer 16

-The Business (Includes details about the Entrepreneurs and ideas of a business)
-The Business Opportunity (Why the business is good and why people will be interested in it)
-The market (The market size and its competitors)
-The objectives of a business (What it hopes to achieve)
-Financial forecasts (Cash-flow forecast and projected sales, revenue and profit for at least the first year of trading)

Question 17

How do business plans assist Entrepreneurs?

Answer 17

-The information can be used to give the business a sense of direction
-The objectives and financial forecast provide the business with targets to aim at and hope to achieve

Question 18

And up-to-date _________________________ is necessary when a business wants lenders or investors to provide financial support

Answer 18

business plan

Question 19

How do small businesses benefit the economy?

Answer 19

-The entrepreneurs who start up businesses bring new ideas that no one else has tried before. Due to the sheer amount of small businesses, there have been an abundance of new innovative ideas, with more to come
-The more businesses there are in a marketplace, the greater the competition; and the greater the competition, the lower the prices; and the lower the prices, the better that country looks, and that means more money for the government.
-Small businesses provide specialists goods and services that larger businesses tend to not.
-Start-ups start as small businesses

Question 20

How does the government help small businesses?

Answer 20

-Grants an interest free or low interest loans. (You may choose to ignore this)
-Lower taxation rates on profits in the early years
-Rent free premises for a period of time
-Free or subsidised training schemes for employees
-Information advice and support from specialist agencies.

Question 21

Name four ways of measuring business size (keep in mind no method is perfect)

Answer 21

-Capital Employed
-Market share
-Number of employees
-Value of output (the amount businesses earn from selling their products)

Question 22

Name five reasons owners would want to expand their business.

Answer 22

-Increase in profits
-Increase in market share
-Reduced costs as a result of economies of scale
-Greater power
-Protection from takeover

Question 23

What are the two types of takeovers?

Answer 23

A hostile takeover (sudden purchase of all available shares at a company)
A friendly takeover (where both parties agree to a takeover)

Question 24

Business grow internally and externally. What is the difference between external growth and internal growth?

Answer 24

-In internal growth, a business might want to expand its production (increase its production of goods and services), and develop new products. It could also find new markets to sell its goods and services in. This is a slow method of business growth.

-In external growth, you buy up another company or business and add it to your “fleet”. Now you have all the assets and employees of that other business and so you have artifically grown in seconds.
(The company may be bought by hostile methods or clean methods)

Question 25

What are the four main types of integration?

Answer 25

-**Horizontal integration brings** together two firms in the same industry who are also in the same sector of business activity. Such examples include two wheat farmers, or two electronics manufacturers, etc... -**Forward vertical integration** involves bringing together two firms in the same industry, **but one is the customer of the other,** such as a food shop and food supplier. -Finally, we have **Backward Vertical Integration** which brings together two firms in the same industry, but one is the **supplier** of the other, like a chocolate manufacturer, and a cocoa producer. -Then there is **Congolomerate** integration, in which the two firms are completely unrelated, like a electronics manufacturer and a horse tamer.

Question 26

What are the issues that may occur with business growth?

Answer 26

-Internal growth is very slow, and it is possibly **that other businesses grow faster with other methods** and overtake your business. -When two seperate businesses are brought together, managers and employees in each business may fear loss of their jobs or status. This is particularly the case if one of the businesses is much larger than the other. -If a business becomes too large than a diseconomies of scale problem might occur, which increases the businesses cost somehow. -Any two businesses that are brought together through integration are likely to have different ways of doing things leading to contradiction. -The integration of two firms will change the control of the business from the original owners.

Question 27

What are the factors that affect business growth?

Answer 27

-Owners Choice -Market Size -Access and Availability -Market domination

Question 28

Give examples to show understanding of each factor that affects business growth

Answer 28

**Owners Choice** > Sometimes the owner might not want to make their business go big. This could be for a variety of reasons: > > - The owner does not want any extra responsibility of workload > - The owner isn't confident that they will be able to handle all the extra work. > - The owner doesn't want to invest additional money in thet business. > - The owner wants to maintain a closer relationship with customers. > - The owner does not want growth to be set as an objective. **Market Size** > Sometimes, businesses have market size as an objective. Other times however this is not the case, businesses that serve local markets do not want to expand because they will face competition with other more conveniently placed locations. Nobody will travel to another city to get a haircut, if there's already a barber in their city. **Access and availability of capital** Small businesses have difficulties obtaining loans from banks and other lenders. This is the most importnat factor that prevents small businesses from expanding. **Market domination** > Sometimes, the market is just already too saturated with top dog contenders that there is no way in hell that a new business could succeed. There's no way you could build a search engine that overtakes Google in popularity at this point, regardless of how revolutionary it might be.

Question 29

Why do a lot of businesses fail?

Answer 29

Businesses fail for a variety of reasons. Not all businesses are succesful. This is due to: -Poor planning and lack of objectives They didn't lay out one of those business plans. This is a key contributor to why this business flopped. Unfortunately they got the recommendation that business plans are just placebo garbage from me, and uh, they didn't question it, sorry. I was wrong, but I still think business plans are mid. -Liquidity Problems A business receives cash from the sale of its prdoucts. However most business sell their products on a **credit basis, which means they receive their cash back at a later date, like 30 days after delivery to the customer.** Cash will leave the business when it pays for expenses and other business costs. There must be enough cash coming in to cancel out this cash being lost. Else, you won't be able to pay the excess, and you flop. **Business that can't control its debts and expenses** are liquidity problems. -Poor management -Failure to invest in new technologies A good example of this is NOKIA's mobile industry. While they are still a fairly dominant company in the 5G and network market, they were titans in the mobile phone market at one point as well. Unfortunately, they didn't react to a threat (iPhone 2007), and then this resulted in their demise and subsequent falling out of relevancy. -Poor marketing A business might have a really good idea, but it might not have been able to convince the media it is revolutionary, as such, it flopped. -Lack of finance Being broke is bad. 😦 -Competition Sometimes a business might just die due to it not being as good as the competition. It might be just this or a combination of this with the above that leads to such brutal collapses of titans. Economic influences are also something to consider. Unemployement, high interests and taxation might reduce the amount of money consumers have to spend on products from businesses. This in turn will reduce businesse's earnings, and potentially cause them to go out of business due to lack of funding.