IGCSE Business Studies Cheat Sheet by HoneyP14

• the business can benefit from economies of scale

• high levels of compet­ition between businesses selling similar products

• total sales in these markets are very high

• standa­rdised products or services are produced and so may not meet the specific needs of all customers or potential customers, therefore leading to lost sales

• It is quicker and cheaper than external recrui­tment, which may involve expensive advert­ising

• No new ideas or experience come into the business.

• The person is already known to the business and their reliab­ility, ability and potential are known.

• The quality of internal candidates might be low

• The business does not have to find a large cash sum to purchase the asset to start with.

• The total cost of the leasing charges will be higher than purchasing the asset.

• individual tuition is given and it is in the workplace so the employee does not need to be sent away (travel costs are expensive)

• the trainer will not be as productive as usual because they are showing the trainee what to do instead of getting on with their job

• it usually costs less than off-th­e-job training

• it may not lead to training qualif­ica­tions recognised outside the business.

• Encourages employees to show creativity and respon­sib­ility.

• Unlikely to be approp­riate in organi­sations where a consistent and clear decisi­on-­making structure is needed, for example, in providing customer service

• Often a much cheaper way of gathering inform­ation than primary research, as the data collection has already been done by others.

• Data may have been collected several years ago and be out of date.

• Newspapers may carry vital economic forecasts if you are trying to assess when a recession is coming to an end and your sales are likely to increase again.

• Data may not be completely relevant as it was not collected with the needs of one business in mind.

• It is up to date and relevant to the business undert­aking it.

• It can be expensive, for example, indivi­dually interv­iewing many people.

• It is most effective when it is used to gather inform­ation which will help the business with a specific problem, for example, to test the market to see if a new product would be likely to succeed.

• Skimming can help to establish the product as being of good quality.

• The high price may discourage some potential customers from buying it.

• If the product is unique, a high price will lead to profits being made before compet­itors launch similar products – then the price will have to be reduced.

• It is useful for getting rid of unwanted inventory that will not sell.

• The revenue will be lower because the price of each item will be reduced.

• Sales are likely to be high as the price is at a realistic level and the product is not under- or over-p­riced.

• If the costs of production for a business are higher than those of compet­itors – perhaps because the product is of a higher quality – then a compet­itive price could lead to losses being made.

• Often used when it is difficult for consumers to tell the difference between the products of different busine­sses.

• In order to decide what this price should be, detailed research would be needed into what prices compet­itors are charging, and this research costs time and money.

• Shares can be sold to a large number of people (in some countries there is a maximum number).

• There are signif­icant legal matters which have to be dealt with before a company can be formed.

• The accounts of a company are less secret than for either a sole trader or a partne­rship. Each year the latest accounts must be sent to the Registrar of Companies and members of the public can inspect them.

• The worker gets paid on a regular basis and does not have to wait long for some money. Wages tend to be paid to manual workers, such as those who work in a warehouse or factory

• As the wages are paid weekly, they have to be calculated every week, which takes time and money.

Few legal regula­tions required

No one to ask for advice

Can make all their decisions

Less finance options available

Gets to keep all the profits

No continuity of the business

• The interv­iewer is able to explain any questions that the interv­iewee does not unders­tand.

• Whether consci­ously or uncons­cio­usly, the interv­iewer could lead the interv­iewee into answering in a certain way, resulting in inaccurate results due to interv­iewer bias.

• Fast, with quicker response times than other forms of survey

• Absence of interv­iewer to explain open-ended questions or to ask follow-up question to gain more detailed inform­ation.

• Easy to complete for the partic­ipant

• Scope for fraud – some people will just answer an online survey to gain any incentives being offered and not give honest answers, or they complete the survey carelessly

• This makes it easy to calculate the worker’s wages and the worker knows exactly how much they will be paid for working a certain period of time.

• The hours worked are often recorded on a time-sheet which must be filled in and used to calculate the wages by the Accounts depart­ment. This system takes time

• Often superv­isors are needed to make sure the workers keep working and producing a good quality product.

• The impact on profit or loss of certain business decisions can also be shown by redrawing the graph.

• Break-even charts are constr­ucted assuming that all goods produced by the firm are actually sold – the graph does not show the possib­ility that invent­ories may build up if not all goods are sold.

• The break-even chart can also be used to show the margin of safety – the amount by which sales exceed the break-even point.

• Break-even charts concen­trate on the break-even point of produc­tion, but there are many other aspects of the operations of a business which need to be analysed by managers,

• Produc­tivity is greater as new, more efficient production methods are used, reducing average costs.

• Unempl­oyment could rise as machin­es/­com­puters replace people on the factory floor and in offices.

• More skilled workers may be needed to use and maintain the new techno­logy. Businesses must offer training to existing workers in the use of new techno­logy. The workers may become more motivated and therefore improve the quality of their work.

• Employees may be unhappy with the changes in their work practices when new technology is introd­uced.

• The inform­ation that is available to managers through the use of IT is much greater and this should result in better and quicker decision making.

New ‘high tech’ products are introduced as new technology makes completely new products available.

• Tries to eliminate faults or errors at all stages of production before passing on to the next stage.

• Expensive to train employees to check the quality of their own work at each stage of produc­tion.

• Reduced costs if products do not have to be scrapped or reworked or service repeated.

• Producer sells large quantities to retailers

• No direct contact with customers.

• target customers will see the advert when they go on Facebook

• It can alienate customers if they find the adverts annoying.

• cheap to use – it has low costs if just placing advert­ise­ments

• Potential customers may not use social media networks.

• reaches groups that are difficult to reach any other way.

• Messages may be altered or used in a bad way and forwarded on to other users, giving the business bad publicity

• It is a flexible way of working and production can easily be changed from one product to another

• It can be expensive as semi-f­inished products will need moving about to the next production stage.

• It allows more variety to products which would otherwise be identical. This gives more consumer choice (for example, different flavours of ready-­meals).

• Warehouse space will be needed for invent­ories of raw materials, components and finished batches of goods. This is costly.

• Retained profit does not have to be repaid, unlike, for example, a loan.

• A new business will not have any retained profits.

• Keeping more profits in the business reduces payments to owners, for example, dividends to shareh­olders who might invest in other businesses instead.

• It should be available to the firm quickly.

• Savings may be too low.

• They can be for varying lengths of time.

• A bank loan will have to be repaid eventually and interest must be paid.

• Large companies are often offered low rates of interest by banks if they borrow large sums.

• Debentures can be used to raise very long-term finance, for example, 25 years.

• As with loans, these must be repaid and interest must be paid.

The business does not have to find a large cash sum to purchase the asset.

• A cash deposit is paid at the start of the period.

• It is almost an intere­st-free loan to the business for the length of time that payment is delayed for.

• The supplier may refuse to give discounts or even refuse to supply any more goods if payment is not made quickly.

• Being paid a bonus can have a positive motivating effect.

• Bonuses can become ‘expected’ every year and if they are not paid – perhaps because the business has had a poor year – then employee disapp­oin­tment can be difficult to manage.

• a broad range of skills can be taught using these techniques

• costs are high

• the business will only need to pay for the course and it will not also lose the output of the employee

• the additional qualif­ica­tions mean it is easier for the employee to leave and find another job.

• it often uses expert trainers who have up-to-date knowledge of business practices.

• Tries to eliminate faults or errors before the customer receives the product or service.

• Expensive as inspectors need to be paid to check the product or service.

• High costs if products have to be scrapped or reworked or service repeated.

• Quality is built into every part of the production of a product or service and becomes central to the ethos of all employees.

• It is expensive to train all employees to check the product or service.

• No customer complaints and so brand image is improved – leading to higher sales.

• Waste is removed and efficiency increases.

• The method is easy to apply.

• Businesses could lose sales if the selling price is higher than compet­itors’ prices.

• Each product earns a profit for the business.

• There is no incentive to reduce costs – any increase in costs is just passed on to the customer as a higher price.

Workers are trained in one task and specialise in this – this increases efficiency and output

Workers can become bored doing just one job – efficiency might fall

Quicker and cheaper to train workers as fewer skills need to be taught

• Detailed qualit­ative inform­ation can be gathered about the product or service.

• If questions are not well thought out, the answers to them will not be very accurate. It may be very misleading for the business if it is thought that a product is liked by consumers, when in fact the respon­dents were only saying they thought the product was quite attractive but they would not actually buy it.

• They can be carried out online – see section below.

• Collating and analysing the results is also time-c­ons­uming.

• They can help improve commun­ica­tions between workers and manage­ment.

• trade unions can organise strikes if they do not receive the pay levels and work conditions they demand

• more flexible in the hours of work

• less likely to seek training because the employees may see the job as temporary

• easier to extend business openin­g/o­per­ating hours by working evenings or at weekends

• part-time employees can be less committed to the business and may be more likely to leave to get another job

• reduces business costs compared to employing and paying a fulltime employee

• more difficult to commun­icate with part-time employees when they are not in work.

• A salary is calculated as an amount of money per year for the job performed by the worker. It is divided into 12 monthly amounts. This means it is easy to calculate salary costs for the business.

• Workers may prefer to be paid weekly

• The payment has to be calculated only once a month instead of at least four times a month – as with wages.

• This form of business organi­sation still offers limited liability to shareh­olders

• The legal formal­ities of forming such a company are quite compli­cated and time-c­ons­uming

• There is now the opport­unity to raise very large capital sums to invest in the business. There is no limit to the number of shareh­olders a public limited company can have.

• Selling shares to the public is expensive.

• A business trading as a public limited company usually has high status and should find it easier to attract suppliers prepared to sell goods on credit and banks willing to lend to it than other types of busine­sses.

• More capital could now be invested into the business

• The partners did not have limited liability. If the business failed, then creditors could still force the partners to sell their own property to pay business debts.

• Both partners were motivated to work hard because they would both benefit from the profits.

• Partners can disagree on business decisions and consulting all partners takes time.

•indep­endence – able to choose how to use time and money

• risk – many new entrep­ren­eurs’ businesses fail, especially if there is poor planning

• may become famous and successful if the business grows

• lack of knowledge and experience in starting and operating a business

• able to make use of personal interests and skills

• Better decisions could result from consulting with employees and using their experience and ideas – as well as being a motivating factor.

• Unpopular decisions, such as making workers redundant, could not effect­ively be made using this style of leader­ship.

• helps new employees to settle into their job quickly

• is time-c­ons­uming

• means workers are less likely to make mistakes.

• delays the start of the employee commencing their job.

These methods can present inform­ation in an appealing and attractive way.

• There is no feedback and the sender of the message may need to use other forms of commun­ication to check that the message has been unders­tood.

• The advantage with this system is that it encourages workers to work faster and produce more goods.

• Workers may concen­trate on making a large number of products and ignore quality, producing goods that may not sell very well because they are of a poor quality

• If the machinery breaks down, the employees will earn less money.

• Unique Selling Point (USP) will mean the business will be first into the market with the new product.

• The costs of carrying out market research and analysing the findings.

• It allows the business to expand into new markets.

• The lack of sales if the target market is wrong

• They provide detailed inform­ation about consumers’ tastes and prefer­ences

• They can be time-c­ons­uming and expensive if conducted by a specialist market research agency.

• Quicker and cheaper than individual interv­iews.

• Can be dominated by just a few people so the researcher will need to be experi­enced to deal with this.

• It should ensure that sales are made and the new product enters the market succes­sfully.

• The product is sold at a low price and therefore the profit per unit may be low

• Market share should build up quickly.

• Might not be approp­riate for a branded product with a reputation for quality.

• Quick decision making, for example, during a crisis.

• No opport­unity for employee input into key decisions, which can be demoti­vating.

• This distri­bution channel is very simple. It involves manufa­cturers selling their products directly to the consumer.

• This is usually imprac­tical for most products because the consumers probably do not live near to the factory and could not go there to buy the products.

• There is a lower price if sold direct to customers – cuts out wholes­ale­r/r­eta­iler.

• It can be very expensive to send products by post or courier and therefore it may not be cost effective.

• Small businesses may be able to sell succes­sfully in niche markets as larger businesses may not have identified them but concen­trated on the mass markets instead. This will reduce compet­ition from the larger businesses in niche markets

• Niche markets are usually relatively small and therefore have limited sales potential. This means it is likely that only small businesses can operate profitably in these markets. If the business wants to grow it will need to look outside the niche market to develop products for mass markets.

• It is most suitable for personal services or ‘one-off’ products.

• Skilled labour is often used and this raises costs.

• The workers often have more varied jobs (they don’t carry out just one task).

• Production often takes a long time.

• It is flexible and often used for high-q­uality goods and services, meaning that a higher price can be charged.

• Materials may have to be specially purchased, leading to higher costs.

• Small retailers can purchase fresh products in small quantities from wholesaler because they have a relatively short ‘shelf life’ before they deteri­orate.

• May be more expensive for the small shop to buy from a wholesaler than if it bought straight from the manufa­cturer

• Wholesaler may deliver to the small retailer thus saving on transport costs.

• Takes longer for fresh produce to reach the shops, so may not be as good quality.

• Wholesaler can give advice to small retailers about what is selling well. They can also advise the manufa­cturer what is selling well.

• The consumer price is often higher than ‘direct selling’ as both the wholesaler and retailer have to cover costs and make a profit.

• Manufa­cturer may not know the best way to sell the product in other markets.

• The producer has less control over the way the product is sold to customers.

• No extra cost if own website is already set up.

• Potential customers may not see the website as the page may come up in a long list of results when using a search engine such as Google.

• Can change adverts quickly and update pictur­es/­prices, and so on.

• Design costs of the website may be high.

• Can provide more inform­ation in adverts and link to other pages with further inform­ation and pictures.

Start selling exports to other countries – opening up foreign markets

Increasing imports into home market from foreign compet­itors

Import products from other countries to sell to customers in ‘home’ country

Employees may leave businesses that cannot pay the same or more than intern­ational compet­itors

• This makes better use of the capital tied up in the business.

• It may take some time to sell these assets and the amount raised is never certain until the asset is sold.

• There is a high output of a standa­rdised product.

• It is a very boring system for the workers, so there is little job satisf­action, leading to a lack of motivation for employees.

• It is easy for capita­l-i­nte­nsive production methods to be used – reducing labour costs and increasing effici­ency.

• The capital costs of setting up the production line can be very high.

• It may benefit from economies of scale in purcha­sing.

• Automated production lines can operate 24 hours a day.

• The business could use this finance to pay wages or suppliers but, obviously, it cannot do this indefi­nitely

• Interest rates are variable, unlike most loans which have fixed interest rates

• Interest will be paid only on the amount overdrawn.

• Overdrafts can be cheaper than short-term loans.

• Immediate cash is made available to the business.

• The business does not receive 100 per cent of the value of its debts.

• No interest has to be paid.

• Dividends will be expected by the shareh­olders.

• The ownership of the company could change hands if many shares are sold, which the original owners might object to.