Tr.

Shun Lae

Edexcel Business Studies Notes

Business Studies Notes by Becca

Chapter-1: What is Business Activity?

➢ Businesses are organizations that exist to produce goods and services,
which can be either consumer goods or producer goods.
➢ Consumer goods refer to goods and services sold directly to consumers,
whereas producer goods are produced by one business for another.
➢ Businesses also have to satisfy people's needs and wants.
➢ Needs are the basic requirements for human survival.
➢ Wants are people’s desires for goods and services.
➢ Infinite means without limits in space or time.
➢ Finite means having an end or limit.

• Different types of organizations have different purposes.

1. Private enterprises- owned by individuals or groups of individuals, operate
in the private sector with the objective of making a profit for their owners.
2. Social enterprises- nonprofit making organizations
3. Their objective is to improve human well-being.
4. Public enterprises- owned by the central or local government. Their
objective is to provide goods and services that private enterprises fail to
provide adequately.

➢ Stakeholders are a group of individuals with an interest in the operation of a

business.
1. Owners
2. Customers
3. Employees
4. Managers
5. Financiers
6. Suppliers
7. The local community
8. The government
 • External factors that affect the business (The changing business
environment)
1. The strength of competition
2. The economic climate
3. Government legislation
4. Population trends
5. Demand patterns
6. World affairs
7. Social factors
➢ The changing environment can bring new opportunities and impose new
limitations.

Chapter 2: Business Objectives

➢ Business objectives refer to the targets set by a business.

The importance of clear objectives

1. Objective help to motivate employees.
2. Objectives motivate the owner, therefore, less chance of a business failure.
3. The objective help to decide where to take a business and what steps are
necessary to get there.
4. Easier to access the performance of a business.
Financial objective
1. survival
2. profit-to earn a financial return and reach profit maximization
3. sales- lower costs larger market share higher profile and generate more
wealth.
4. increase market share
5. financial security profit satisficing
• Financial objective are important because most owners in the private sector
want to make money.
Non financial objectives
1. social objective- to improve human well-being.
2. personal satisfaction
3. challenge
4. independence and control

Why might objective change as business evolved?

1. market condition
2. technology
3. performance
4. legislation
5. internal reasons

Chapter-3: Sole trader, partnership, social enterprise and

franchises
➢ People who set up businesses are called entrepreneur.
➢ Entrepreneurs are innovators, organizers, risk taker and decision makers.
➢ Unincorporated is a business where there is no legal differences between
the owner and the business.
➢ Incorporated is a business that has a separate legal identity from that of its
owner.
Sole trader
➢ Sole trader is a business owned by a single person.
➢ All sole traders have unlimited liability.
➢ Unlimited liability is where the owner of a business is personally liable for
all business debts.
Advantages of sole trader
1. The owner keeps all the profits.
2. Independence- owner has complete control.
3. Simple to set up with no legal requirements
4. Flexibility
5. Can offer a personal service because they are small.
6. May qualify for a government help.

Disadvantages
1. Have unlimited liability
2. May struggle to raise finance
3. Too much of responsibility
4. Long hours and very hard work
5. Usually too small to exploit economies of skill
6. No continuity- the business die with the owner.
Partnership
➢ Partnership is a business owned by between 2 and 20 people.
Advantages of partnerships
1. Easy to set up and run.
2. Partners can specialize in the area of expertise
3. Shared responsibility
4. Shared capital
5. Financial information is not published
Disadvantages
1. Have unlimited liability
2. Shared profits
3. Partner may disagree and fall out
4. Any partner decision is legally binding on all
5. Partnership still tend to be small
 ➢ Limited partnership is where some partners contribute capital and enjoy a
share of their profit but do not take part in the running of the business.
➢ Limited liability is where the business owner is only liable for the original
amount of money invested in the business.
Franchises
➢ Franchise is a structure in which a business allow another operator to trade
under their name.
➢ The owner of franchisees is called franchisors.
Advantages to the franchisees
1. Less risk
2. Backup support is given
3. Set up costs are predictable
4. National marketing may be organized
Disadvantages to the franchises
1. Profit is shared
2. Strict contracts
3. Lack of independence
4. Can be expensive
Advantages to the franchisor
1. Fast method of growth
2. Cheaper method of growth
3. Franchisees take some risks
4. Franchisees are more motivated than employees
Disadvantages to the franchisors
1. Share profit
2. Poor franchise may damage brand's reputation
3. Franchisee may get merchandise from elsewhere
4. Cost of support for franchisee may be high
Social Enterprise
➢ Social enterprise is a business that aims to improve human or
environmental well-being.
➢ They are nonprofit organization.
Cooperative is an organization where all the people working their own an equal
share of it.
➢ Consumer cooperative is owned by its customers
➢ Retail cooperative is owned by retail members.
➢ Worker cooperative is owned by its employees.

Chapter-4: Limited companies and multinationals

Limited Companies

➢ Limited companies are business organization that have a separate legal

identity from that of their owners.
➢ The owners have limited liability.
Advantages of private limited companies
1. Have limited liability
2. More capital
3. Control cannot be lost to the outsiders
4. Businesses continue if the shareholder dies
5. Has more status than a sole trader.
Disadvantages of private limited companies
1. Financial information has to be made public
2. Cost money and takes time to set up
3. Share profit Takes time to transfer shares to the new owner
4. Cannot raise huge amounts of money like PLCs
Advantages of public limited companies
1. Large amount of capital
2. Limited liability
3. Can exploit economies of skill
4. Shares can be bought and sold very easily
5. Have a high profile in the media.
Disadvantages of public limited companies
1. Expensive set up costs
2. Outsiders can take control
3. More financial information has to be made public
4. Maybe more remote from customers
5. More regulatory control owing to company acts
6. Managers may take control rather than the owners
Multinational company
➢ Multinational company is a large business with significant production or
services operations in at least two different countries.

Chapter-5: Public corporations

➢ Public corporations are businesses organization owned and controlled by
the state or government.

Reasons for the public ownership of businesses

1. Avoid wasteful duplication.
2. Maintain control of strategic industry.
3. Save jobs.
4. Fill the gaps left by the private sector.
5. Serve unprofitable regions.
Reasons against the public ownership of businesses
1. Cost to the government
2. Inefficiency
3. Political interference
4. Difficult to control
Privatization

➢ Privatization is a transfer of public sector resources to the private sector.

Why does privatization take place?
1. To generate income.
2. To reduce inefficiency in the public sector.
3. As a result of deregulation.
4. To reduce political interference.

Charter-6: Appropriateness of different forms of ownership.

Factors affecting the appropriateness of different form of ownership
1. Growth.
2. Size.
3. The need for finance.
4. Control.
5. Unlimited liabilities.

Objectives and the type of organization

➢ Small sole traders might be happy to make a modest amount of profit.
➢ Median sized PLs often do not wish to go public because they are afraid of
losing costrol to outsider.
➢ Most multinationals want to grow so that they can dominate global
markets.
Chapter -7: Classification of businesses

➢ Primary sector is the provision that involves the extraction of raw materials
from the earth.
For example: Agriculture, fishing, forestry, mining and quarrying.

➢ Secondary sector is the provision that involves the conversion of raw

materials into finished and semi-finished goods.
For example: assembly planks.

➢ Tertiary sector is the provision of services in the economy.

For example: commercial service, financial service.

➢ De-Industrialization is a decline in manufacturing.

Reasons for de-industrialization.

1. People prefer to spend more on services than goods.
2. Competition in the production of goads from developing countries.
3. Public sector mainly provides services.
4. Advances in technology.
Chapter-8: Decisions on location
Factors that influence the location and relocation of businesses
1. Proximity to the market. Businesses that make large | heavy
products may be located close to their customers to keep transport
cost down.
2. Proximity to labor. Businesses needs large number of workers, have
to consider wage costs & labor skill
3. Proximity to materials.
4. Proximity to competitors. Most businesses will prefer to locate
where competition is minimized.

The impact of the internet on location decisions

➢ Many entrepreneurs have more flexibility when choosing a location.
➢ Businesses do not need to have fixed premises. They could run their
business from anywhere where they can get an internet connection.

Influence of legal controls and trade blocs on location

➢ The government may try to influence location decisions for several reasons.
1. To avoid congestion where there is too much development.
2. Minimize the impact businesses might have on local communities.
3. To encourage manufacturers to locate where unemployment is high.
4. Government use financial incentives to influence business choice of
location.
5. To attract foreign manufacturers into the country.
Chapter-9: Globalization
➢ Globalization is the growing integration of the world's economies.

Key features
1. Goods and services are traded across international border.
2. People are free to live and work in any country.
3. High level of interdependence between nations
4. Capital can flow freely between different countries.
5. Free exchange of technology and intellectual property.

Reasons for globalization

1. Advanced technology
2. Improved international transport network.
3. Huge amount of deregulation.
4. Increase in tourism.
5. Domestic markets have saturated.

➢ Globalization can flourish if governments are committed to it. Such as

putting up trade barriers, closing border and denial in permission.
Benefits of globalization
1. Assess to larger market.
2. Lower costs.
3. Assess to labor
4. Reduced taxation
Threats of globalization
1. Competition
2. International takeovers
3. Increased risks of external shocks
(The events occurred in one country may affect another)
Chapter-10: The importance and growth of multinational
companies
How have multinationals developed?
1. Economies of scale
2. Marketing
3. Technical and financial superiority
Benefits to a business of becoming a multinational.
1. Larger customer base
2. Lower costs (due to the economies of scale)
3. Higher profile (large companies with strong brand name)
4. Avoiding trade barriers (by establishing operations in those countries)
5. Lower taxes. (basing the head office in lower taxed countries)
Benefits of multinationals to the country/economy
1. Increase in income and employment
2. Increase in tax revenue
3. Increase in exports
4. Transfer of technologies
5. Improvement in the quality of human capital.
6. Enterprise development
Drawbacks of multinationals to a country/economy
1. Environmental damage.
2. Exploitation of less developed countries.
3. Repatriation of profit.
4. Lack of accountability.

Chapter-11: International trade and exchange rate

➢ International trade creates opportunities for business growth, increase
competition and provide more options.
 ➢ Exports are goods and services sold oversea.
➢ Imports are goods and services bought from oversea.
➢ Visible trade is the trade in physical goods.
➢ Invisible trade is a trade in services.
➢ Exchange rate is the value of one currency in terms of another.

Fall in the exchange rate

➢ Price of export - Falls
➢ Demand - rise.

➢ Price of imports - rise

➢ Demand- fall.

➢ When the exchange rate falls, there is said to be a depreciation in the

exchange rate.
Rise in the exchange rate
➢ Price of exports - rise
➢ Demand- fall

➢ Price of imports - fall

➢ Demand - rise

➢ When the exchange rate rise, there is said to be an appreciation in the

exchange rate.
➢ If the exchange rate falls, the exporters can sell goods more cheaply abroad.
➢ Higher export sale means more employment, income and tax revenue.
➢ Lower exchange rate means the import prices will rise.

Chapter-12: Government objectives and policies

➢ One of the roles of most government is to provide a range of public
services.
 ➢ Taxation
The money raised from taxation is used to help funds government spending
on public services.
➢ Direct taxes mean it is paid on income.
For example: 1. Income tax- paid on personal income.
2. Corporation tax- paid on company’s profits.

➢ Indirect taxes mean they are levied on spending.

For example: VAT is paid when bugging goods & services.

➢ Fiscal policy is using changes in taxation and government expenditure to

manage the economy.

How can governments affect business activity?

1. Change the laws.
2. Influence the interest & exchange rate.
3. Change level of government expenditure and taxation.
4. Introduce policies that have a direct impact on businesses such as
giving subsidies.

➢ Barrier to entry are restrictions that make it is difficult for new firms to
enter a market.
➢ The government should promote competition. They could do this by
encouraging the growth of small firms, lowering barriers to entry and
introducing anti-competitive legislation.
➢ Business activity can have a negative impact on the environment.
For example: water pollution.
Trade barriers
➢ Trade barriers are measures designed to restrict trade
It includes -
1. Tariffs - a tax an import.
2. Quota- a physical limit on the amount allowed into the country.
3. Subsidy- financial support to domestic producer to compete with
oversea firms.
4. Administrative barriers- The use of strict health and safety or
environmental regulations.
Trade Bloc
➢ A trade bloc is where a group of countries in the same geographical region
sign a trade agreement to reduce or remove trade barriers.
Interest rate.
➢ The use of interest rates to help control the economy is called monetary
policy.
➢ Higher interest rate means demand for borrowing money is to likely to fall.
➢ Higher interest rate means the costs for business will increase if they
already taken out a loan.
➢ The purchase of capital goods funded by borrowing is discourage.
➢ Higher interest rates means that demand in the economy falls. This is
because consumers are less willing to borrow money to fund spending.
➢ With lower interest rate, businesses are likely to invest more and grow
faster.
➢ When interest rate rises, most people's mortgage payment rises. As a result,
less disposable income for them.
➢ Consumer demands for goods bought with borrowed money will fall when
interest rate rise.
➢ Savers will be hit if interest rates are lows.
Chapter -13: External factors
➢ Sometimes, businesses have to deal with events and issues that are
completely beyond their control.
This usually mean that businesses have to make changes to the way they
operate.
➢ The effects of external factors can be both positive and negative.
Social
1. Increased consumers awareness.
2. Changing demand patterns.
3. Increased numbers of woman at work.
4. More part time workers.
5. Urbanization - process of constructing more and more buildings on
rural land.
Technology
➢ New technology results in new products, which in turn provide new market
opportunities.
➢ New technology means production becomes more capital intensive and
costs are reduced.
➢ Capital-intensive is the use of relatively more machinery than labor in
production.
➢ Changes in technology can shorten the amount af time products can be
marketed for.
➢ The development of social media has helped to improve communications
between businesses and consumers. It allows businesses to remain aware
of changing consumer needs.
Environment
1. Global warming
2. Habitat destruction
3. Resource depletion
4. Sustainable development
Political
➢ If the national security restricts the movements of goods, people and
capital, this could have a negative. impact on businesses.
➢ If the now government is elected which is very pro-business, it might
encourage more people to become entrepreneurs. It might also mean that
more foreign investors may be attracted.

Chapter- 14: Measuring success in business

➢ The success of a business can be measured in different ways. These are-
1. Revenue
2. Market share
3. Customer satisfaction
4. Profit
5. Growth: - turnover or revenue
- number of employees
- market share
- the amount of capital employed
- EU definition of size

EU definition of firm size

Micro Small Medium-sized Large
Turnover Less than Less than €10 €10-€50 Greater than
€2 million million million €50 million
No. of employees Less than Less than 50 50 to 249 Greater than
10 249
Capital employed Less than Less than €10 €10-€43 Greater than
€2 million million million €43 million
Chapter- 15: Reasons for business failure
Cast flow problems
1. Overtrading - Occurs when a business tries to fund a large volume of
production with insufficient cash.
2. Investing too much in fixed assets.
3. Allowing too much credits.
4. Over-borrowing.
5. Seasonal factors.
6. Unexpected expenditure.
7. External factors.
8. Poor Financial management.

Lack of finance
➢ Both new and established businesses may fail if they cannot attract funding
➢ This might be because they are undercapitalized.
It means starting a business with insufficient capital.

Not competitive
➢ Some businesses fail because they are unable to compete effectively in the
market.
Such as-
1. New entrants.
2. Ineffective cost control
3. Ineffective marketing.
4. Lack of business skills
5. Poor leadership
 ➢ Many businesses collapse because they failed to be innovative.
➢ This is because they may fail to adopt new technologies or develop new
products.
➢ Some are not prepared to take the risk and invest money.
➢ Businesses That do not install the latest and more efficient production
technology will tend to have higher costs and lose to the competitors.

Chapter-16: The importance of good communication in

business
➢ Communication is about sending and receiving information.

Types of communication
➢ Downwards communications- passing messages from the top of the
organization to the bottom.
➢ Upward communication- passing messages from the bottom to the top.
➢ Horizontal communication - exchange of information between parties on
the same level. These can be both formal or informal.

Formal and informal communication

➢ Formal communication is the use of recognized channels.
➢ Informal communication is the use of non-approved channels. Such as
gossips or rumors.
Internal and external communication
➢ Internal communication is the communication between people inside the
business.
➢ External communication is the communication between the business and
those outsiders such as their customers.

Importance of good communication

➢ Efficiency and profitability may suffer if the communication is poor.
➢ Mistakes, wasted resources, confusion may be caused by the poor
communication.
➢ If the communication is ineffective, employees may not understand what
they have to do, poor motivations as works being accidentally repeated.
➢ Costs rises due to the poor communication.
➢ Decision making maybe slowed down due to the poor communication.
Methods of communication
1. Face to face communication
2. Witten communication - letters, reports, forms etc.
3. Electronic communication. - emails, internet, mobile phono etc.

Chapter-17: Barriers to communication in business

➢ Things that got in the ways of good communication are called
communication barriers.
Type of communication barriers:
1. Lack of clarity
2. Technological breakdown
3. Poor communication skills
4. Jargon - vocabulary used and understood by people in a specific
group.
 5. Distraction
6. Business culture
7. Long chain of command
8. Using the wrong medium (sensitive/confidential information should
be used in a specific medium)
9. Different countries, languages and cultures.

Problems caused by ineffective communications

1. Higher staff turnovers
2. Staff absences
3. Low employee motivation
4. Disengaged workers
5. conflicts, mistakes and work-related injuries may occur.
6. Damaged relations with customers and suppliers.
7. Misunderstanding and misinformation
8. Poor customer services
9. Difficulty making changes (such as in the process of production)
10.Higher legal costs
How can communication barriers be removed?
1. Recruitment - should recruit staffs with good communication skills
2. Training - to train staff in communicating effectively.
3. Writer communication
4. Technology- to repair faulty equipment
5. Chain of command - to provide shorter chain of command.
6. Social events
7. Culture change.

Chapter- 18: Recruitment and selection

Types of employment
1. Full time employment - work the full working week.
2. Part time employment- work for hours in a day.
 3. Job share - two part time workers share the work and the payment of
a single full-time post.
4. Casual employment - do not get any guarantees of work from their
employer (the employer can fire them anytime).
5. Seasonal employment - Works at particular times of the year.
6. Temporary employment - An employment taken for a short period of
time to cover for absent workers

Reasons why a business may need new staffs

1. The business is expanding and more labor is needed.
2. To replace the people who left.
3. There are vacant positions because of promotion.
4. Required staffs for a short / temporary period.

Stages in the recruitment process

1. Identify the number and type of staffs needed.
2. Prepare a job description and person specification.
3. Advertise using appropriate media
4. Evaluate applicants and select a shortlist for interview.
5. Carry out interviews.
6. Evaluate interviewers and appoint the best candidate.
7. Provide feedback for unsuccessful applicants.
Recruitment documents
➢ Job description - states the title, outline tasks and duties.
➢ Person specification- qualifications, experience, skills, attitudes.
➢ Application form
➢ Curriculum vitae or résumé -provided by the job seeker (Hence,
personalized. Allows to express their individuality).
Internal and external recruitment
➢ Internal recruitment - appointing workers from inside the business.
 ➢ External recruitment - appointing worker from outside the business.
Ways to recruit employees
1. Advertisement
2. Shortlisting = selects a small group of candidates for interview.
3. Interviewing

Chapter-19: Legals controls over employment

➢ Unfair dismissal is when a worker is dismissed illegally by a business.
What can happen without legal control over employment?
1. Long hours of work
2. Deny employment rights.
3. Expose the workers to danger
4. Discrimination
5. Unfair dismissal
Discrimination
➢ Choosing one person rather than another based on characteristic is known
discrimination.
➢ Gender discrimination usually occurs when a woman in the work place does
not receive equal treatment because she is a female.
Laws to deal with gender discrimination
➢ Advertisement for jobs must not specify particular gender.
➢ Work title must be genderless
➢ Promotion and dismissal must not be made on the basis of gender.
➢ Wages for both genders must be the same.
➢ Businesses will have to take more care when designing documents.

➢ Race and religion discrimination is done of ground of colors, race, ethic

origin, religion, or nationally

➢ Disability
 ➢ Sexual preference
➢ Age

Minimum wage law

➢ Minimum wage is the minimum amount per hour, which mast workers are
entitled to be paid.
Reasons why the government set legal minimum wage
➢ To benefit disadvantaged workers.
➢ To reduce poverty.
➢ To help the businesses
Advantages of minimum wage law
➢ Promote greater equality and fairness among workers
➢ Motivated workers
➢ Reduce staff turnover and absence
➢ Raise productivity
➢ Low paid people receive more money Reduce the cost to the taxpayer

Chapter-20: Training
➢ Training is the process that involves increasing the knowledge and skills of a
worker to enable them to do their job more effectively
The importance of training
➢ It allows employees to acquire new skills or make them multi-skilled.
➢ It helps Improve existing skills. It Increases productivity and make the
worker better leaders.
➢ Motivate the employees, hence, higher productivity.
➢ Training helps new jobs due to expansion or promotion.
➢ Teaching news recruits how to work safely in the new environment.
Drawbacks to training
➢ High costs Time- consuming
➢ Employees leaving after being trained can affect the business negatively
 ➢ Loss of output during the time when workers are being traine
Types of training
Induction training
➢ Induction training is the training given to new employees when they first
start a job.
Advantage of induction training
➢ Help new recruits settle and be famine with their new surroundings
Things involved in the induction training
➢ A complete tour of the workplace.
➢ Introduction to job and direct work colleagues.
➢ Introduction to senior staffs.
➢ Helps the employees to learn company history, aims and objectives.
➢ Provides health and safety training.
➢ Helps to know company policies such as dress code, disciplinary, procedures
and holidays.
On-the-job training
➢ On the job training is the training That takes place while doing the job
Things that involved in on-the-job training
1. Watching another worker. - watching and shadowing the action of
experienced employee.
2. Mentoring- where a trainee is paired with an experienced member of
staff for a given period.
3. Job rotation - where employees alternate between different jobs
during the course of their employment
Advantages of on-the-job training
1. Output is being produced.
2. Relevant because trainees learn by actually doing the job.
3. Cheaper than other form of training.
4. Can be easy to organize
Disadvantages of on-the-job training
1. Output may be lost if workers make mistakes and through the time
diverted to showing the new recruit how to do things.
2. May be stressful for the workers-particularly if working with other
experienced workers.
3. Staffs may get frustrated if they are unpaid workers during the time
of training.
4. On the job training could be a danger to others for occupations such
as surgeon or train drivers.

➢ Off the job training- training that takes place away from the work area.
➢ For example: it might involve workers going to college once a week.
Advantages of off the job training
1. Output is not affected if mistakes are made.
2. Learning cannot be distracted by work.
3. Training could take place outside work hours if necessary.
4. Customers and others are not put at risk.
Disadvantages of off the job training.
1. No output because the employees do not contribute to work.
2. Some off the job training is expensive if provided by specialists.
3. Some aspects of work cannot be taught off the job.
4. It may take time to organize
Training in health and safety
➢ Governments aim to protect workers with legislation that forces businesses
to provide a safe and healthy workplace.
The benefits of training
1. Keeping workers up to date- Workers will need training if there are
changes that might affect their jobs.
2. Improving labor flexibility-Some businesses train their workers in a
range of different jobs so that they are multi-skilled.
 3. Improving job satisfaction and motivation- workers will feel more
secure if they have been trained to do their job effectively.
4. New jobs in the business
5. Training for promotion- having a higher rank can require a training to
perform well.
The limitations of training
1. High cost of training courses and other resources
2. Learning by doing- some jobs cannot be easily taught through
simulation.
3. Loss of output
4. Employees leaving- if the employees leave after being trained, it may
negatively impact the business as they invested in training them

Chapter-21: The importance of motivation in the work place

➢ Motivation is the desire to achieve a goal.

Why is employee motivation important in business?

1. Easier to attract employees
2. Easier to retain employees
3. Higher labour productivity
Herzberg two-factor theory
➢ Frederick Herzberg discovered that the factors at work would help to give
employees job satisfaction, are called motivators.
➢ He also found that other factors could leave workers dissatisfied which are
called hygiene factors.
Maslow’s Hierarchy of needs
1. Physiological needs- the basic human necessities
2. Safety and security- job security and safe working conditions.
3. Social needs- team works and social facilities.
4. Esteem needs- to be recognized and respected.
 5. Self-actualization- opportunities to be challenged, be creative, solve
problems and make decisions.
Taylor’s theory of scientific management
➢ Taylor said that workers were motivated by money.

Chapter-22: Methods of motivation at work

1. Remuneration- money paid to employees for their work or services.
• Time rate- payment system based on the amount of time employees spend
at work.
• Pierce rate- paid due to the amount of piece that the employee produced.
• Performance-related pay- pay increases are given if performance targets are
met.
• Bonus payment- paid extra apart from the wage.
• Commission- paid based on the value of sale.
2. Promotion
3. Fringe benefits - perks over and above the normal wage or salary.
Non-financial rewards
1. Job rotation- allows employees to change jobs from time to time.
2. Job enrichment- allows employees to take on more responsibilities
and challenges
3. Autonomy- allows employees to make decisions (usually about the
way they work)

Chapter-23: Organisation structure and employees

➢ The organisation chart shows the different job roles in the business and
how they relate to each other.

Employee roles and responsibilities

➢ Directors are appointed by the owners to run the business.
➢ Managers are responsible for planning, controlling, organizing, motivating,
problem solving, decision making and overall to achieve the aim of the
owner.
➢ Supervisors monitor the work in their particular area.
➢ Operatives involved in the production process.
➢ General staffs do not have a specific skill, but they can be trained to be
promoted.
➢ Professional staffs are skilled and highly trained.

Features of organisations structure

1. Chain of command- This is the route through which orders are passed down
in the hierarchy.
2. Span of control- The number of people, or subordinates, a person directly
controls in a business.
3. Flat and hierarchical (tall) organisational structures

In flat structures:
i. Better communication (because of short chain of command)
ii. Lower management costs
iii. Control maybe friendly and less formal

In tall structures:
i. Poor communication
ii. Higher management costs
iii. There may be a clear route for promotion that might help to motivate
staff.
iv. Control is more formal and less friendly

4. Delegation- managers allowing the employee to take on more tasks.

Centralisation and Decentralisation

➢ Centralised- the employees do not have any authority.

➢ Decentralised- every employee has the authority to make decisions.
 Advantages of Centralised
1. Senior management has complete control over resources.
2. Senior managers are trained and experienced in decision making.
3. It prevents parts of the business acting independently.
4. Coordination and control are easier.
Disadvantages of Centralised
1. Employee demotivation as they have no authority.
2. Less creativity and fewer ideas.
3. Procedures may be needed to make decision making easier.
4. People at the top may be out of touch with the needs of customers
served by more local employees.

Advantages of Decentralised
1. Motivated workforce due to their autonomy.
2. Speeds up decision making.
3. It takes pressure off senior managers by reducing their workload.
4. Employees can be creative and share their ideas.
5. Provides more promotion opportunities at the different managerial
levels.

Disadvantages of Decentralised
1. Senior managers may lose control of resources.
2. Costs may be higher due to variation in decision making process
3. Some employees may not be able to make decisions.
4. Some employees may not want extra responsibility.

Chapter-24: Departmental functions

➢ Human resources department involves:
Workforce planning
Recruitment and selection
Training
Health and safety
Staff welfare
Employment issues
 Industrial relations
Disciplinary and grievance procedures
Dismissal
Redundancy
➢ Finance department involves:
Recording transactions
Wages and salaries
Credit controls
Cash flow forecasting and budgets
Accounts

➢ Marketing department
Market research
Product planning
Pricing
Sales promotion
Advertising
Customer services
Packaging
Distribution

➢ Production department
• Production involves making goods and providing services.
• Other activities that may be carried out by this department are:
Design
Purchasing
Stock control
Maintenance
Research and development
Relationship and interdependence between departments
➢ The departments should work together as they are interdependent,
meaning that they rely on each other.
➢ A good communication between them is needed to make sure that the
business runs effectively.
 ➢ Chapter-25: Source of finance
The need for finance
1. Short-term needs: to fund for day-to-day expenses.
2. Long-term needs: to buy resources that can be used repeatedly.
3. Start-up capital: funds needed to start up a business.
4. Expansion: expansion requires a huge amount of funds.

➢ Short term finance is the money borrowed for less than a year.
➢ Long term finance is the money borrowed for more than a year.

➢ Source of finance maybe internal or external.

➢ Internal source of finance- finance generated by the business itself.
1. Personal savings
2. Retained profits: Profits held by the business instead of returning it to
the owners.
3. Selling assets

➢ External source of finance- finance obtained from outside the business.

1. Bank overdraft: business spending more money than they have in the
account.
2. Trade payables: buying resources from the suppliers and paying them
later.
3. Credit cards
4. Loan capital: a fixed agreement between the bank and a business
5. Unsecured bank loan- This means that the bank lends money without
the security of having a claim on your assets if you do not pay it back.
6. Mortgage: the borrower must use land or property as security.
7. Debenture: debenture holders are creditors and entitled to a fixed
rate of return but they do not have the voting rights
8. Hire purchase: purchasing goods with a loan.
9. Share capital: the money generated from the sale of shares.
 10.Venture capital: funded by the capitalist who provide money to the
new businesses. They are often known as the venture capitalists.
11.Crowd funding: where a large number of people invest in a business
by using online media.

Chapter-26: Cash flow forecasting

➢ Cash flow: the money going in and out of a business.
The importance of cash
Cash is needed
• To pay suppliers, overheads and employees
• To prevent business failure
The difference between cash and profit
➢ The profit figure and cash balance may not be the same because:
• Some goods are sold on credit
• Owners might put more cash into the business
• The purchase of fixed assets
• The cash balance at the start of the financial period may be zero

Cash inflows and outflows

➢ Cash inflows- the money going into a business. (usually are the incomes)
➢ Cash outflows- the money coming out of a business. (usually are the
expenses)
➢ Net cash flow- the difference between cash inflows and outflows
net cash flow = cash inflow-cash outflow
➢ Cash flow forecast- It is a financial document that shows the cash inflows
and outflows over a period of time.
➢ closing balance- the amount of cash the business has at the end of the
month.
closing balance= opening balance + net cash flow
 ➢ opening balance- the amount of cash the business has at the start of the
month.
Why are cash flow forecasts important?
• Identifying cash shortages (it helps identify if the business needs an
overdraft)
• Supporting applications for funding (it acts as a future outlook for the
business)
• Help when planning the business (it helps improve performance)
• Monitoring cash flow (the business can analyses their problems and
strength)

Chapter-27: Costs
Why does production generate cost?
➢ Production of goods and provision of services use up resources.
➢ Marketing, distribution and administration create costs for the business
➢ Interest to pay on loans

➢ Fixed costs- costs that do not change when the level of output change.
➢ Such as: Rent, insurance, research & development costs etc.

➢ Variable costs- costs that change when the level of output change.
➢ Such as: raw materials, labour, fuel etc.

• Total costs= Fixed cost + variable cost

• Average cost= Total cost/Quantity produced

➢ Total revenue is the money generated from sale of goods or services

• Total revenue= Price x Quantity
➢ Profit is the difference between total revenue and total cost
• Profit= Total revenue – Total cost
 • Chapter-28: Break-even analysis
➢ Break-even point is the level of output where total costs and total revenue
are exactly the same.
➢ At this point, the firm do not make any profit or loss.
➢ At any level of output above the break-even point, the firm make a profit.
➢ At any level of output below the break-even point, the firm make a loss.
➢ Margin of safety is the amount of output available to be sold above the
break-even point.

• Break-even point= Fixed cost/Selling Price-Variable cost per unit

➢ Break-even chart shows how much output a firm should produce in order to
make a profit.
➢ It shows the total revenue, total costs and the profit at different level of
output.
➢ It also shows the margin of safety.

The limitations of break-even chart

➢ The chart does not account for the discounts, such as bulk-buying discounts.
➢ The chart assumed all the outputs will be sold without being left with the
stocks.
➢ If the information about total revenue and total costs are inaccurate, the
chart will also result in inaccuracy, leading the business to miscalculate their
break-even point.

Chapter-29: Statement of comprehensive income

➢ Statement of comprehensive income-financial document showing a
firm's income and expenditure in a particular time period.
It includes:
1. Revenue: The money generated from the sale of goods and services
2. Cost of sales: costs like raw materials or wages
3. Gross Profit
 4. Administrative Expenses: general overheads of a business.
5. Other operating expenses: small regular expenses
6. Selling expenses: advertising, sales commission and promotional
expenses etc
7. Operating profit
8. Finance costs: interest paid on loans
9. Profit for the year
10.Profit for the year after tax

• Gross profit = revenue - cost of sales

• Operating profit = gross profit - expenses.
• Profit for the year = operating profit - cost of finance
Distributed profit & Retained profit
➢ Distributed profit- profit that is returned to the owners of a business.
➢ Retained profit-profit held by a business rather than returning it to the
owners.
➢ The business can use the retained profit for other purposes such as
expansion.
➢ Dividend-share of the profit paid to shareholders in a company.
How might the statement of comprehensive income be used in decision
making?
1. Investment decision- the investors can check the statement to see
whether they should invest in the business or not.
2. Cost analysis- it helps the business to analyse and keep their costs under
control.
3. Basis for future forecasts- it helps predict the future financial
statements.
4. Making comparisons- The investors can compare the business’s
statement with its competitors to decide where to invest their funds.
The nature and importance of profit
➢ It acts as an incentive to set up a business
➢ It also acts as a measure of business performance
Chapter-30: Statement of financial position
➢ Statement of financial position is the summary of business’s assets,
capital and liabilities.
➢ Assets are the resources owned by a business.
➢ Capital is the finance provided by the business owner.
➢ Liabilities are the debt of the business.
Features of the statement of financial position
1. Non-current assets: assets that can last for more than a year.
2. Current assets: assets that last for less than a year
3. Net current assets: current assets – current liabilities
4. Non-current liabilities: debts that can be repay after more than a year
5. Current liabilities: debts that have to be repaid during a year.
6. Net assets: total assets – total liabilities
7. Shareholder’s equity- money invested by the shareholders.

Chapter-31: Ratio Analysis

➢ Ratio analysis is the approach to investigating accounts by comparing two
figures.
➢ Two types of financial ratios are- Profitability ratio & Liquidity ratio.
➢ Profitability ratio measures the performance of the business.
➢ Liquidity ratio measures if the business can pay its short-term debts or not.
Profitability Ratios
➢ Gross profit margin = Gross profit/revenue x 100
➢ Operating profit margin = Operating profit/revenue x 100
➢ Mark-up = Profit per item/Cost per item x 100
Liquidity Ratios
➢ Liquidity refers to the ease & speed which assets can be converted into
cash.
➢ If the business does not have enough liquid assets, it may not have the
funds to pay for its bills, resulting in a business failure.
➢ Current ratio = Current assets/Current liabilities
 ➢ Acid test ratio= Current assets – inventory/Current liabilities
➢ Acid test ratio is the more severe test of liquidity as it does not account for
the inventory.
➢ Return on capital employed = Operating profit/capital employed x 100
Using ratios to make comparisons
➢ Ratios can be used to:
• Assess the performance & liquidity of the business.
• Monitor the progress of the business
• Be compared and calculated
• Make comparisons between businesses to compare with the rivals

Chapter-32: The use of financial documents

➢ One of the main reasons why the businesses produce account is to assess
the performance of the business.
➢ Stakeholders may be interested in the financial documents of a business.
1. Managers and employees – to make sure they are paid on time and to
negotiate wages.
2. Owners and shareholders – to receive the positive financial returns.
3. External stakeholders – banks may want to know in order to decide if they
should lend money. Suppliers are interested as they want to assess the
creditworthiness of a business.
Using financial documents to make informed decisions
➢ Businesses will make better informed decisions if they have access to
financial documents.
• Funding decisions- financial documents help the business to predict
when they will need more finance
• Reducing costs-the financial documents assess the costs and help the
business to keep it under control.
• Increasing profitability-The business can use the documents to increase
their profits.
• Investment decisions
Other users of financial documents
1. Government
2. Competitors
3. The media
4. Tax authorities
5. Auditors
6. Registrar of companies

Chpater-33: Market Research

➢ Market research is a collection, presentation and analysis of information
relating to the marketing and consumption of goods and services.

➢ There are many purposes of a market research. Such as:

1. To identify and understand customer needs
2. To identify gaps in the market
3. To reduce risk
4. To inform business decisions

Primary market research

➢ Primary market research is a collection of new information that does not
already exist. The primary market research includes-
1. Questionnaires
• It is a set of written questions
• Cheap and easy to conduct. (Pros)
• It leaves a written record which can be used by the business later on. (Pros)
• Some respondents might find it irritating. (Cons)

2. Focus group or consumer panels

• Groups of consumers are asked for feedbacks about the products over a set
period of time.
• Can give a very detailed information. (Pros)
• All the consumers would participate and are potential customers. (Pros)
 • Can be cost-effective. (Pros)
• It is time-consuming and can be expensive to host a consumer panel. (Cons)
• Since the group is small, the result would be unreliable (Cons)

3. Observation
• It is where the market researchers watch the behaviors of their customers.
Usually used in the retail outlets.

4. Test marketing
• It involves selling a new product in a restricted geographical area to test it
and sale level before launching it.
• It reduces the risk of failure.
Secondary Market Research
➢ Secondary market research is a collection of information that already
exist.
➢ This includes: Websites, media, commercial publications, internal data,
government publications and competitors.
Qualitative and Quantitative Data
➢ Qualitative data is the data written in words.
➢ Quantitative data is the data expressed in numbers.
Roles of social media in collecting market research data
➢ Social media can provide a cheap way of gathering data.
➢ Wider market base
➢ Ability to target
➢ Lower costs for the business
➢ Fast & easy to assess the data
Importance of the reliability of market research data
➢ If the data is inaccurate or out of date, it could affect the decisions of the
business.
➢ The reliability depends on the number of people and if they represent the
views of every potential customer.
 ➢ Therefore, business collect the samples.
➢ The business should also consider that the customer behavior patterns are
unpredictable and could change over a period of time.
➢ The customers could also give inaccurate or false answers.

Chapter-34: The importance of marketing

Markets and Marketing
➢ Market is a set of arrangements that allows buyers and sellers to
communicate and trade in goods and services.
➢ Marketing means identifying customer needs and satisfying them.
➢ Marketing includes:
1. Satisfying customer needs
2. Building customer relationships
3. Keeping customer loyalty: Reward cards, free gifts charitable donations &
partnership deals.
Product and market orientation
➢ Product orientated is where the business focus on the product itself
while manufacturing a product.
➢ Market orientated is where the business focus on satisfying the needs of
customers while manufacturing a product.
Market share and market analysis
➢ Market share = Total business sales/Total sales in the whole market x 100
➢ Market analysis is the quantitative and qualitative assessment of market.
Niche marketing and mass marketing
➢ A niche market is a small market segment that has not been serviced by the
larger businesses. Examples- hairdressing.
➢ Niche markets can usually avoid competition and easy to focus on their
customer needs.
➢ A mass market is the very large markets in which products with mass appeal
are marketed. Examples- crisps and soft drinks.
 ➢ Mass markets can exploit economies of scale as they are being produced in
a large quantity. However, there are a lot of competitions, hence, the
business needs to market effectively to survive.
1. Changing customer needs- the market change because the needs of the
customers change over time.
2. Changing consumer spending patterns- if the consumers spend more, the
business could charge higher profits.
3. Increased competition- the behavior of the rivals must be watched carefully.
4. Competition puts business under some pressure- when the businesses are
threatened by the competitions, they have to lower prices, market their
products more, offer better quality products, use effective advertisement
and provide a better customer service.

Chapter-35: Market segmentation

➢ Market segmentation is a part of a market which shares the same
characteristics.
Methods of market segmentation
1. Location (geographical) segmentation- segmenting the market based on
their locations.
2. Demographic segmentation- segmenting the market based on their age,
gender, income, social class, religion and ethnic origin.
3. Lifestyle (or psychographic) segmentation- segmenting the market based on
the way an individual lives.
Benefits on market segmentation
➢ It is easier to meet the needs of the segmented market.
➢ Businesses that produce different products for different segments can
increase their revenue.
➢ Customer’s loyalty will improve if their needs are being met specifically.
➢ Businesses may reduce the research and development costs if they target
the specific potential market.
➢ Businesses can offer a wider range of goods to different customer groups.
Chapter-36: Product
➢ A marketing mix is the elements of a firm’s marketing that are made to
meet the customer needs. It is often known as 4P(s). Product, Price,
Promotion & place.
➢ Product development is a continuing process for all the businesses. It
involves generating ideas, analysis, development, test marketing,
commercialization and launch.
➢ The businesses need to develop new products in order to be updated and
to gain a competitive edge in the market.
Goods & Services
➢ The goods and services are the products of a business. However, most of
the products are services nowadays.
➢ The business should consider the packaging while launching a product. It
has to be convenient, protective, cost-effective, contains information,
environmental and the design has to be appealing.
The Product Life Cycle
➢ The product life cycle is the level of sales at the different stages that the
product goes through. It has 5 stages.
1. Development- the sale level is zero as the product is not launched yet.
2. Introduction- when the business introduces the new product in the
market.
3. Growth- the stage where the sales are growing rapidly.
4. Maturity and saturation- the stage where the sales start to fall. The
businesses use the extension strategies to revive the product life.
5. Decline- the stage where the product is taken off the market, usually due
to the change in consumer tastes, new products or new technologies.
Extension strategies
➢ Extension strategies strengthen the life of a product before they decline.
➢ It can help the products to recover and even grow sometimes.
➢ It can also make the competitors difficult to enter the market.
Product Portfolio
➢ It is the range of product a business is marketing at the moment.
➢ Boston matrix describes the products according to their market share and
potential to grow. It includes:
1. Star- high market share, high market growth.
2. Cash cow- High market share, low market growth.
3. Question mark- low market share, high market growth.
4. Dog- low market share, low market growth.

Chapter-37: Price
➢ The business has to consider many factors while deciding the price.
1. Marketing mix- Price has to fit in with other marketing mix.
2. Objectives- Pricing can be used to achieve certain aims.
3. Taxes
4. Costs
5. Consumer’s perception
6. Competitions
Different types of pricing
1. Cost-plus pricing- adding a percentage to the cost of producing the product
to get the price.
• Can ensured that all the costs are covered.
• However, it ignores all the market conditions such as competitors,
consumer spending patterns and other external factors.

2. Penetration pricing- setting a low price to start with in order to get

established in the market. Prices can be increased later.
• Consumers will get into the habit of buying the product even if they
increase it later.
• Can attract bulk-buyers and large retailers.
• However, the business may face negative responses from the customers
once the price is raised.
 3. Competition-based pricing- setting almost the same or the same as the
rivals.
• The price war can be avoided
• Price leadership can be formed

4. Destroyer pricing- setting low prices until the rival go out of business.
• If the pricing works, it can make the rival leave the market.
• However, the destroyer will have a larger market share.

5. Skimming- setting a high price and then lowering it later

• It helps generate a high revenue before the rivals enter the market.
• It is targeted for early adopters who are willing to pay for higher prices to be
the first ones to enjoy the new products.

6. Promotional pricing- lowering the price of products for a short period of

time.
• Discounts & sales
• Psychological pricing- setting the price slightly below the round number.
• Loss leader- selling products lower than the cost

Chapter-38: Place
➢ Place is the location where people can buy products.
Distribution channels
➢ Distribution channel is the route taken by a product from the producer to
the customer. Such as:
1. Retailers- businesses that buy goods from manufacturers and wholesalers
and sell them in smaller quantities to consumers. They often bulk buy from
the manufacturers.
2. Independents
3. Supermarkets
4. Department stores
 5. Multiples or chain stores
6. Kiosks and street vendors
7. Market traders
8. Online Retailers
E-tailing (E-commerce)
➢ E-commerce or e-tailing is the use of electronic systems to sell goods and
services.

➢ Two main types of e-commerce are:

• Business to consumers- selling of goods by businesses to consumers.
• Business to business- businesses selling to other businesses online.
Other distributing methods
➢ Direct selling is where businesses sell their products directly to consumers.
➢ Wholesalers usually buy from manufacturers and sell to retailers.
➢ Agent or broker- intermediary that brings together Buyers and sellers.
Choosing appropriate distribution channels
1. The nature of the product
2. Cost
3. The market
4. Control

Chapter-39: Promotion
➢ There are two types of promotion. Above-the-line and Below-the-line
promotion.
Above the line promotion
➢ It is where the business places the advert on the media.
➢ Huge audience can be reached.
➢ Can target market.
➢ Cheap and easy to set up
Below the line promotion
➢ It is the promotion which do not involve the media.
➢ It includes sales promotions, merchandising and packaging, direct selling
and personal selling, exhibition and fair trades.
Public relations
➢ It is the attempt by a business to communicate with interested parties.
➢ The number of approaches must be used by businesses to attract publicity.
➢ It includes; Press release, Press conference, Sponsorship, Donations.
➢ PR benefits the businesses by being a cheap method of promotion.
Branding
➢ One of the main aims of a business is to create a strong brand name.
➢ Branding helps the business to differentiate its products from the rivals.
➢ It also creates customer loyalty.
➢ Helps recognition of the brand and develop an image.
➢ The businesses can raise the prices once the brand gets stronger image.
The use of promotion strategies in different market segment
• Advertising- helps reach a larger audience.
• Sponsorship- can target the customers to the people attending the events.
• Product trials- the customers can see if the product meets their needs.
• Special offers- can help clear the stocks and encourage the customers to
make additional/repeated purchases.
• Branding- a strong brand name can help exploit other industries.

Chapter-40: Economies and Diseconomies of scale

➢ Economies of scale- the falling average costs due to the firm growing big.
Internal economies of scale
➢ It is the cost benefits that an individual firm can enjoy when it expands.
• Purchasing economies- large firms that buy lots of resources get cheaper
rate.
 • Marketing economies- some marketing costs are fixed. These costs are
spread over more units of output for a larger firm. Hence, the average costs
fall.
• Technical economies- large factories are often more efficient than the
smaller ones. Large firms make more use of machineries and software.
• Financial economies- large firms can get access to money more cheaply.
They also have wider variety of sources to choose from.
• Managerial economies- A large firm can afford and employ specialists, as a
result, efficiency is likely to improve and average costs fall.
• Risk-bearing economies- large firms are more likely to have wider product
ranges and sell into a wider variety of markets. This reduces the risk in
business.
External economies of scale
➢ It is the cost benefits that all firms in the industry can enjoy when the
industry expands.
➢ Such as: Skilled labour, Infrastructure, cooperation, Ancillary and
commercial services
Diseconomies of scale
➢ It is the higher average cost due to the firm growing too big.

• Bureaucracy- if the business is too bureaucratic, it means that the resources

can be wasted, causing it to raise the average costs.
• Labour relations- in the large firms, the relations between workers and
managers may deteriorate. So, the resources might be wasted.
• Control and coordination- the need for supervision will raise the costs
Other limits to growth
1. Lack of finance
2. Nature of the market
3. Lack of managerial skills
4. Lack of motivation
Chapter-41: Production and Productivity
➢ Production involves converting resources into goods and services. These
goods and services are provided to satisfy the needs and wants of people.
When making products businesses may use different production methods.
Job production
➢ It is the method of production that involves employing all factors to
complete one unit of output at a time. For example, a Wedding dress.
Advantages Disadvantages
Workers are likely to be motivated Production may be slower as it is
because the task is different. time-consuming

The quality of goods or services from Job production is also likely to be

job production is usually very good. more expensive than other methods
as it can be customized.
Some customers are willing to pay
more if their product is unique.

Batch production
➢ It is the method that involves completing one operation at a time on all
units before performing the next. For example, food processing.
Advantages Disadvantages
Unit costs will be lower when the Planning and co-ordination may be
batch production is used. more difficult.
Production is also flexible because The workers may be bored because
orders with different requirements of specialization.
can still be met.

Flow production
It is a large-scale production of a standard product, where each operation on a
unit is performed continuously one after the others, usually on a production line.
 Advantages Disadvantage
Output can be produced very quickly High set up cost
The speed is fast Low employee motivation due to the
repetitive tasks.
The products can be more standardize.

The main features of flow production

• Large quantities are produced
• A standardised product is produced
• A semi-skilled workforce, specialising in one operation only is employed
• Large amounts of machinery and equipment are used
Labour intensive and capital intensive
➢ Labour-intensive is a production method that make more use of labour
relative to machinery.
➢ Capital-intensive is a production method that make more use of machinery
relative to labour.
Productivity
➢ It is the rate at which goods are produced, especially in relation to the work,
time and money needed to produce them.
➢ Labour productivity= Total output/no. of worker
➢ Capital productivity= Total output /capital employed
Increasing labour productivity
1. The government invests more in education by providing more equipment
for
2. schools and improving the quality of teaching.
3. Better motivated workforce
4. Labour is organised and managed more effectively.
5. The flexibility of labour
Increasing capital productivity
Downsizing- the process of reducing capacity usually by laying off staff.
Relocation- the businesses often relocate their operations to improve efficiency.
Outsourcing- the work currently done by a business is given to specialists who can
do the same work at a lower cost.
Lean production- Reducing the number of resources used in the production.
The impact on business of productivity improvements
• Financial impact
• Competitiveness
• Workforce
• Customers
➢ Customers are likely to benefit if a business tries to improve productivity. As
the decrease in average cost could result in lower prices. Also, the improved
productivity might lead to the better products for customers.

Chapter-42: Lean production

➢ Lean production is the approach to production aimed at reducing the
quantity of resource used.
➢ As a result, lean production:
• Raise productivity
• Reduces costs and cuts lead times
• Reduce the number of defective products
• Improve reliability and speeds up products design
Just-in-time production
➢ It is the production technique that is highly responsive to customer orders
and uses very little stock holding system.
➢ The business does not:
• Hold any stock of raw materials or components. The suppliers have to
deliver resources straight to the production line.
• Produce any goods unless they have been ordered, thus, the stock holding
is saved.
Kaizen
➢ It is a Japanese work and refers to the practice of continuous improvement.
 ➢ It involves: Standardisation, Teamworking, Empowerment, Suggestion
schemes, Quality circles and multi-skilling.
The importance of using resources effectively
• Financial benefits- If fewer resources are used, business costs will be lower
• Improved competitiveness- Lean producers will have a competitive edge in
the market.
• Positive environment effects- If a business use the resources effectively, it
will be making a positive contribution to the protection of the environment.
• Improved customer service- customers are likely to benefit if business
makes more effective use of resources.

Chapter-43: Technology in production

The impact of new technology in the primary sector
➢ The technology can help raise the productivity in agriculture and help to
employ less labour.
The impact of new technology in the secondary sector
➢ Production has become more capital-intensive in many industries. This
means that more machinery is used in production instead of other
resources such as labour.
Computer aided design (CAD)
➢ It is the use of computers to design a product.
Computer numerically controlled machines (CNCs)
➢ Machines that carry out the instructions fed by computers
Computer aided manufacturing (CAM)
➢ It is where computers link and control the design and production of goods
in manufacturing.
Computer integrated manufacturing (CIM)
➢ It involves using computers for the entire production process.
The impact of new technology in the tertiary sector
➢ In financial services, many transactions can be carried out online.
➢ In marketing, the use of technology has made the market research easier
and more convenience.

Chapter-44: Factors of production

➢ Factors of production are the resources used to produce goods and
services. It includes land, labour, capital and enterprise.
• Land- It includes natural resources.
• Labour- People employed in a business
• Capital- It includes man-made resources
• Enterprise- responsible for setting up and running the businesses. The
person who does this is known as the entrepreneurs.
Specialisation and the division of labour
➢ Specialisation is the production of a limited range of goods.
➢ Division of labour is the specialisation in specific tasks or skills by an
employee.
Advantages of the division of labour
1. The workers concentrate on the task that they perform the best.
2. The skills of the tasks are improved as they perform the tasks repeatedly.
3. Less time-consuming as the workers are not switching from one task to
another.
4. The organisation of production is easier and more convenient.
Disadvantages of the division of labour
➢ Work can become boring because of repetition; thus, some employees may
leave.
➢ As one stage of production depends on another, there may be delays if one
stage has an issue or has a technical break-down.
Chapter-45: Quality
➢ Quality is the feature of a product that allow it to satisfy customer’s needs.
The importance of quality
➢ Increased competition has forced firms to improve quality. Consumers
would not need to buy products from businesses that fail to deliver quality.
➢ Government legislation designed to protect consumers has forced firms to
➢ improve quality.
➢ Poor quality in production can harm a business’s reputation and image.

Traditional quality control

➢ Quality control means making sure that the quality of a product meets
specified quality standards.
Total quality management (TQM)
➢ It is the managerial approach that focuses on quality and aims to improve
the effectiveness, flexibility and competitiveness of the business.
Quality assurance
➢ It is the working methods that take into account customer’s wants when
standardising quality- it often involves guaranteeing that quality standards
are met.
Features of TQM
1. Quality chains- Every worker in a business is like a link in a chain and every
worker is both a customer and a supplier. This avoid faulty products ever
being made.
2. Everyone is involved- Every department, activity and worker are organised
to take into account quality at all times.
3. Quality audits- Statistical data is used to monitor quality standards. These
checks or audits aim to reduce variations.
4. Teamwork- TQM stresses that teamwork is the most effective way of solving
5. problems.
6. Customer focused- Firms using TQM are committed to their customers.
They respond to changes in people’s needs and expectations.
7. Zero defects- Many quality systems have a zero-defect policy.

Quality standards- Business can earn a reputation for quality by following a

code of practice or gaining quality awards.

Quality and competitive advantage

Businesses that produce high-quality products may gain a competitive edge
in the market quality awards.