Saturday, August 25, 2012

Chapter 1: The purpose of Business Activity

The economics problem: needs and wants.

Basically, all humans have needs and wants. Needs are things we can't live without, while wants are simply our desires that we can live without. We all have unlimited wants, which is true, since all of us want a new PC, a car, new graphics card, etc. that we actually do not need to live. Businesses produce goods and services to satisfy needs and wants.

Although we have unlimited wants, there are not enough resources for everyone. Resources can be split into 4 factors of production, which are:

- Land: All natural resources used to make a product or service.
- Labour: The effort of workers required to make a product or service.
- Capital: Finance, machinery and equipment required to make a product or service.
- Enterprise: Skill and risk-taking ability of the entrepreneur.

Entrepreneurs are people who combine these factors of production to make a product.

With these discussed, lets move on to the economic problem. The economic problem results from limited resources and unlimited wants. This situation causes scarcity, when there are not enough goods to satisfy the wants for everybody. Because of this, we will have to choose which wants we will satisfy (that will be of more benefit to us) and which we will not when buying things. For any choice, you will have to would have obtained if you didn't spend that money. For example, you would have got a book if you didn't buy the pen, or you would have a burger if you didn't buy the chips. Basically, item that you didn't buy is the opportunity cost. Make sure that the opportunity cost isn't higher than what you bought!


"Opportunity cost: the next best alternative given up by choosing another item."
Here is a diagram showing the whole economic problem:


Division of labour/Specialisation

Because there are limited resources, we need to use them the most efficient way possible. Therefore, we now use production methods that are as fast as possible and as efficient (costs less, earns more) as possible. The main production method that we are using nowadays is known as specialization, or division of labour.


"Division of Labour/Specialisation is when the production process is split up into different tasks and each specialized worker/ machine performs one of these tasks."

Pros:
  • Specialized workers are good at one task and increases efficiency and output.
  • Less time is wasted switching jobs by the individual.
  • Machinery also helps all jobs and can be operated 24/7.
Cons
  • Boredom from doing the same job lowers efficiency.
  • No flexibility because workers can only do one job and cannot do others well if needed.
  • If one worker is absent and no-one can replace him, the production process stops.
Why is business activity needed? (summary)
- Provides goods and services from limited resources to satisfy unlimited wants.
- Scarcity results from limited resources and unlimited wants.
- Choice is necessary for scarce resources. This leads to opportunity costs.
- Specialisation is required to make the most out of resources.

Business activity:
  1. Combine factors of production to create goods and services.
  2. Goods and services satisfy peoples wants.
  3. Employs people and pays them wages so they can consume other products.

Business Objectives:
All businesses have aims or objectives to achieve. Their aims can vary depending on their type of business or these can change depending on situations. The most common objectives are:
  1. Profit: Profit is what keeps a company going and is the main aim of most businesses. Normally a business will try to obtain a satisfactory level of profits so they do not have to work long hours or pay too much tax.
  2. Increase added value: Value added is the difference between the price and material costs of a product. E.g. If the price when selling a pen is $3 and it costs $1 in material, the value added would be $2. However, this does not take into account overheads and taxes. Added value could be increased by working on products so that they become more expensive finished products. One easy example of this is a mobile phone with a camera would sell for much more than one without it. Of course, you will need to pay for the extra camera but as long as prices rise more than costs, you get more profit.
  3. Growth: Growth can only be achieved when customers are satisfied with a business. When businesses grow they create more jobs and make them more secure when a business is larger. The status and salary of managers are increased. Growth also means that a business is able to spread risks by moving to other markets, or it is gaining a larger market share. Bigger businesses also gain cost advantages, called economies of scale.
  4. Survival: If a business do not survive, its owners lose everything. Therefore, businesses need to focus on this objective the most when they are: starting up, competing with other businesses, or in an economic recession.
  5. Service to the community: This is the primary goal for most government owned businesses. They plan to produce essential products to everybody who need them.
These business objectives can conflict because different people in a business want different things at different times.

Stakeholders:
Stakeholders are a person or a group which has interest in a business for various reasons and will be directly affected by its decisions. Stakeholders also have different objectives and these also conflict over time.

There are two 6 types of stakeholders, and these types can be classified into two groups with similar interests.

Group 1: Profit/Money
  • Owners:
  1. Profit, return on capital.
  2. Growth, increase in value of business.
  • Workers
  1. High salaries.
  2. Job security.
  3. Job satisfaction.
  • Managers
  1. High salaries.
  2. Job security.
  3. Growth of business so they get more power, status, and salary.
Group 2: Value
  • Customers
  1. Safe products.
  2. High quality.
  3. Value for money.
  4. Reliability of service and maintenance.
  • Government
  1. Employment.
  2. Taxes.
  3. National output/GDP increase.
  • Community
  1. Employment.
  2. Security.
  3. Business does not pollute the environment.
  4. Safe products that are socially responsible.
So... That's the first chapter guys. I realised that doing summaries in this format takes so much time, so the next chapter I will do it more in note form, making this less of a study guide but a revision guide or summary. Chapter two coming out soon!
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113 comments:

  1. Replies
    1. How dare you insult him?! He is better than u! He is helping people! You must be ashamed!!!

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    3. Are these notes useful?

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    4. what the fuck are you fags complaining about, someone spent their time to get this shit together for your sorry ass

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    5. To: Anonymous. I think you are the one should be ashamed cuz "Super Star" is not insulting the poster. For my understanding is like this and i don't know what the earth are you thinking about this case and i had seen you had been praised the poster about those notes and most of the comment were written by you, so this seem like you like the poster's notes. Lastly, i think you are annoyed just like your name "Anonymous" !

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    6. YOU GUYS ARE BULLSHIT THIS HELPRD ME WITH MY HOMEWORK

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  2. are these notes related to past paper answers

    ReplyDelete
  3. there is a book with the same notes right

    ReplyDelete
    Replies
    1. yeah, its the exact stuff from IGCSE Business Studies Third Edition.

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    2. BUT IT IS MADE SHORTER THEN WHAT IT IS IN THE BOOK.

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  4. I have my exam tommorow and this was really helpful... thnx

    ReplyDelete
  5. Precise and to the point! Just the way they expect our answers in igcse... Thank youu! Very helpful it is :)

    ReplyDelete
  6. thank you sooo much! really helpful! please keep the work up:) i have an exam, and i used your notes and i got full marks:)can you please give me your number or facebook incase i want to contact you:) <3 xx

    ReplyDelete
    Replies
    1. thanks soooo much my exams are in 7 days and this was very helpful

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    2. AMAZING NOTES UR BRILLIANT <3 U just made my life so much easier to study for my exams. Thnx so much Infinity Love... <3333333333333333333333

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    3. This blog is good but they have just copied the whole book - Revision guide. Anyways I found the useful revision content for igcse/ a levels etc on the blog www.downloadandstudy.blogspot.com . They keep on adding new stuff and the best part is each and every stuff available on this blog is detailed solved. Helped me a lot.

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  7. This site is amazing! thank you very much for the help!!!!

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  8. I have my boards comming up and this was really helpful.......thanks!!

    ReplyDelete
  9. Thanks a lot it really help me a lots. Do you have other chapters also?

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  10. Pal, can you please give me your number ? Where are you from man ?

    Dude this site really helped bro ! Thanks a lot for putting in your crucial time in doing these notes for IGCSE Business Studies ! I have my boards coming up on May 8th, 2012. I just gave my IGCSE Mock Exams !

    Really helped !

    ReplyDelete
    Replies
    1. i have my mock tomorrow, could you tell me some questions that you got please?

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    2. Which variant!?
      i got mine on 8th may too :D

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  11. You can find them all here:
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  12. where is chapter 2???

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  13. Are there any more blogs that u have created for other subjects, like math and , all the three sciences?????
    And thank you for the BS blog, it was really helpful!!!!! :D,cause I have my boards coming up.

    ReplyDelete
  14. hey thnk man helped alot
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  15. Hey helped alot
    Did you use your igcse text book?

    ReplyDelete
  16. This is great!
    Have my finals in 2 weeks, this is really gonna help me a lot!
    Peace.

    ReplyDelete
  17. THANK yOUUUUUUUUUUUUUU

    Sir there are question in Chapter. Can you post solution of Questions


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  18. Sir give me your opinion about this question

    Purbeck plc owns and manages a major leisure complex. The directors of
    the company are considering demolishing the complex and building a new
    shopping centre. The directors have different opinions about this plan.
    The Human Resource Manager says that too many groups of people would suffer from the plan. He thinks that the plan should be dropped.
    The Chief Executive says that his main responsibility is to the owners of the business and that profits should come first.
    a) How would the workers in the leisure centre be affected by
    the decision?
    b) Do you agree with the Chief Executive that profits should be the main aim of the business? Explain your answer.

    ReplyDelete
    Replies
    1. Its really simple dude, think of it in a logical way, cause Business Studies is about 75% logic.
      Put yourself in the place of the workers, what is a leisure centre, what kind of workers are employed there (e.g any specially skilled workers required?) and compare and contrast it to working in a shopping centre.
      For part B, discuss why profit is important to a business, (business aims) and also other aims that a business might have, and compare its importance to profit.
      Hope this helped, :)

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    2. All the anwswers for the questions are in the back of the textbook.

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  19. what are the two factors they should take into account when deciding from which farms to buy the food

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  20. Thanks a lot, I really understand this chapter well!!!!!!!

    ReplyDelete
  21. i,m confused with my business study test

    ReplyDelete
  22. the notes are realy helpful

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  23. WHERE I CAN GET CHAPTER WISE QUESTIONS???? PLZ HELP

    ReplyDelete
  24. Tomorrow is my exam and you really helped me
    THANX!!

    ReplyDelete
  25. "Make sure that the opportunity cost isn't higher than what you bought!".... Why?

    ReplyDelete
    Replies
    1. go to free past papers.com they have business past paper questions.

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    2. Pls put up igcse economics revision notes too...thanks!

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  26. Otherwise you wouldn't have made the best choice :)

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  27. hello

    I really like your notes for the first chapter in business studies for o level. They are simple and direct to the point. It really satisfies the need of the students and very clear to understand. So hope to see the second chapter very very soon
    Very nice of you.

    ReplyDelete
  28. This is a great blog! Very helpful for both students and teachers. Thank you very much :) And keep up the good work!

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  29. Thanks you soooo much bro i really appreciate this i lost my business studies text book and i would hv been screwed if it wasnt for this!!!

    ReplyDelete
    Replies
    1. Bro? Is he our brother! That is very great, you are lucky but why you needing to look at this you can ask him to teach you privately itself!

      Also, it is very bad that you carelessly lost your business text and how could you be screwed unless you are a nail????

      Delete
    2. To ^
      just cuz u call someone bro doesnt really hv to mean that he is your brother for real!! -_-

      Delete
  30. Less supply but so much demand, I think this is the real problem of our economy. With this variables, we can't make a healthy cycle.

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  65. Very Help full

    ...

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    Regards,

    ReplyDelete
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