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IGCSE Business Management Full Summary
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A full summary of the book for the IGCSE Business Management exam.
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1. Understanding Business activity❖ Business Activity
Key points
- Resources or also known as factors of productions include land, labour,
capital and enterprise.
- Resources are inputs to productive activity and products are outputs
from productive activity.
- Firms own by private individuals are private enterprises.
- Firms = businesses
- An entrepreneur is a person with the know-how and willingness to take
the risks and decisions necessary to set up and run a business.
- Opportunity cost is the benefit lost by not consuming or producing the
next best alternative.
- Revenue comes from the sale of goods and services to customers.
- Opportunity cost is the cost of choice, meaning that the true cost of
something is what you have to give up to get it.
Specialization
It involves individuals and organizations focusing their resources on a
limited range of productive tasks. It requires trade.
Without specialization:
● far fewer goods and services would be available to trade today,
meaning fewer businesses
● fewer employment opportunities
● Incomes and living standards would be much lower
→ Businesses specializing in the production of one particular good or
service.
→ Workers specialize in a particular occupation or skill.
Increased specialization in modern business has been made possible for
the following reasons:
● We now exchange good and services for money-making trade
easier.
● Specialized machinery and equipment has been developed and
is widely available to improve the quality of goods and services.
● The production of many goods has become automated using
computer-controlled machinery and industrial robots to carry out
specific tasks.
● People have developed more and more specialized skills.
, The division of labour in specialization helped increase the speed and quality
of production processes and the number of goods and services that can be
produced with scarce resources.
Division of labour = labour specialization
Advantages Disadvantages
Employees can make the best use Individuals must rely on others to
of their particular talents and skills. produce the goods and services
they want but cannot produce
themselves.
Employees can increase their skills Workers can become bored doing
and experience by repeating tasks. the same job, making the quality
and efficiency of their work
decrease.
Employees can produce more Many repetitive manual tasks are
output and reduce business costs if now undertaken by computer-
they concentrate on the same job or controlled machinery and robots,
tasks. which has reduced job satisfaction
and employment opportunities.
More productive employees can
earn higher wages.
Added Value
Is the difference between the price paid for a product by a consumer and the
cost of natural and man-made materials, components, tools, and equipment
used to make it.
A business can increase the value it adds by:
● Increased specialization and using resources as efficiently as
possible.
● Reducing waste.
● Making its products more appealing to consumers through
advertising.
● Creating a recognized brand that consumers are willing to pay
more for ( like Coca-Cola ).
The purpose of Business Activity
, Business Activity is needed because:
● Few people are self-sufficient and able to make all the goods
and services they need and want. We, therefore, rely on
business activity to produce goods and services to satisfy our
needs and wants.
● Productive resources need to be combined and organized to
produce goods and services.
● Productive resources are scarce and we cannot produce
enough to satisfy all human needs and wants. Businesses
organizations, therefore, help to determine what goods and
services to produce, how to produce them and who to produce
them for.
→ The purpose of the Business activity is to make a profit, this is done by
selling at a price greater than the total cost of production.
Revenue is the total earn by a business when selling its goods or services.
→ The business that is non-profit has a different goal such as helping people,
or animals, with many others.
❖ Classification of Businesses
Key Points
- Primary sector: industries that produce or extract natural resources.
- Secondary sector: industries involved in processing natural resources,
manufacturing or construction.
- Tertiary sector: service industries ( the distribution and sale of products
to consumers)
- Manufacturing: the process of converting natural resources into other
products.
- De-industrialization: the decline of manufacturing and the growth of
services in developed economies.
- Mixed economy: an economy that combines private sector and public
sector ownership of resources and provision of goods and services.
Business Classification
It can be classified by:
● The types of goods and services they specialize in.
● How they are owned and controlled.
, Chain of Production
→ The production of any given good or service involves a chain of productive
activity. Meaning that the businesses need to obtain many goods and
services for production from other firms, such as machines, materials,
power, insurance and banking services.
→ There are different stages of production, for example:
Industries
Industrial sector = Industry
→ Primary sector industries:
● Crop and animal production.
● Forestry and logging.
● Fishing.
● Mining.
→ Secondary sector industries:
● Food processing.
● Textiles.
● Chemicals.
● Water collection, treatment and supply.
● Construction.
→ Tertiary sector Industries
● Transportation and storage.
● Accommodation and food services.
● Education.
● Internet Services.
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