Cambridge IGCSE Business Studies (0450) Syllabus

What did Taylor's scientific management theory conclude about motivation?

Taylor believed workers are motivated mainly by money (pay), so paying by results (piece rate) and breaking jobs into efficient tasks would maximise productivity.

In Herzberg's two-factor theory, what are hygiene factors and motivators?

Hygiene factors (e.g. pay, working conditions, company policy) do not motivate but cause dissatisfaction if poor. Motivators (e.g. recognition, achievement, responsibility, advancement) positively motivate workers.

Distinguish financial methods of motivation from non-financial methods.

Financial: wages, salaries, piece rate, commission, bonus, profit-sharing, fringe benefits. Non-financial: job rotation, job enrichment, job enlargement, teamworking, training, opportunities for promotion.

What is the difference between a wage and a salary?

A wage is usually paid weekly/hourly and varies with hours worked (time rate or piece rate). A salary is a fixed annual amount paid in equal monthly instalments regardless of exact hours.

What does a typical organisational structure chart show?

The chain of command, levels of hierarchy, span of control, the function/role of each person, and the lines of communication and accountability within the business.

Define span of control and chain of command.

Span of control: the number of subordinates directly reporting to a manager. Chain of command: the path along which authority and instructions pass down through the levels of an organisation.

Compare a tall (narrow span) structure with a flat (wide span) structure.

Tall: many levels, narrow spans, close supervision but slow communication. Flat: few levels, wide spans, faster communication and more delegation but managers can be overloaded.

List the main functions/roles of management (after Fayol).

Planning, Organising, Coordinating, Commanding (directing), and Controlling.

What is delegation and one benefit of it?

Delegation is passing authority/responsibility for a task down to a subordinate. A benefit: it motivates and develops employees and frees managers to focus on more important tasks.

Compare autocratic, democratic and laissez-faire leadership styles.

Autocratic: leader makes all decisions, one-way communication. Democratic: leader consults employees and involves them in decisions. Laissez-faire: leader gives broad goals and lets employees decide how to achieve them with little interference.

What are the stages of the recruitment and selection process?

Identify the vacancy, produce a job analysis, write a job description and person specification, advertise the vacancy, receive applications/CVs, shortlist candidates, interview and test, then select and appoint.

Distinguish a job description from a person specification.

A job description outlines the title, duties, tasks and responsibilities of the job. A person specification lists the qualifications, skills, experience and personal qualities the ideal candidate should have.

Compare internal and external recruitment.

Internal: filling a vacancy from existing employees — cheaper, faster, candidate is known, motivating, but creates another vacancy and no new ideas. External: recruiting from outside — brings new skills/ideas but is slower, costlier and riskier.

Compare induction, on-the-job and off-the-job training.

Induction: introducing a new employee to the workplace and procedures. On-the-job: training while doing the actual job (watching/being guided). Off-the-job: training away from the workplace (e.g. college course).

What is the difference between dismissal and redundancy?

Dismissal: ending employment because the worker has broken the contract or is incapable/misconducting. Redundancy: ending employment because the job itself is no longer needed (not the worker's fault).

What are the four elements needed for effective communication?

A sender (transmitter), a clear message, a medium/channel, a receiver, and feedback to confirm the message was understood.

Distinguish formal from informal communication.

Formal communication follows official channels of the organisation (memos, meetings, reports). Informal communication occurs outside official channels (the 'grapevine', casual chat between employees).

What is a communication barrier? Give three examples.

A communication barrier is anything that stops a message being sent or understood properly. Examples: use of technical jargon, a poor/inappropriate medium, language differences, noise/distractions, or too long a chain of command.

What is the difference between marketing and market research?

Marketing is the management process of identifying, anticipating and satisfying customer needs profitably. Market research is the collection and analysis of data about customers and the market to inform marketing decisions.

Distinguish primary from secondary market research.

Primary (field) research: collecting new, original data first-hand (surveys, interviews, observation). Secondary (desk) research: using existing data already gathered by others (government reports, internet, sales records).

Distinguish quantitative from qualitative research data.

Quantitative data is numerical/statistical and can be measured (e.g. 60% prefer brand X). Qualitative data concerns opinions, attitudes and reasons why (e.g. focus group views on a product).

What are niche marketing and mass marketing?

Niche marketing targets a small, specialised segment of the market. Mass marketing aims a product at the whole market (a large, undifferentiated audience) to achieve high sales volume.

What are the four elements (Ps) of the marketing mix?

Product, Price, Place and Promotion.

Describe the stages of the product life cycle.

Introduction (launch, low sales), Growth (rising sales), Maturity (peak/levelling sales), and Decline (falling sales). Extension strategies can prolong the maturity stage.

Name four pricing methods.

Cost-plus (mark-up on cost) pricing, competitive pricing, penetration pricing (low price to enter market), skimming pricing (high price for new/unique product), and promotional pricing.

What is the difference between above-the-line and below-the-line promotion?

Above-the-line: paid advertising through mass media (TV, radio, newspapers, internet ads). Below-the-line: other promotion the firm controls directly (sales promotions, direct mail, personal selling, sponsorship).

Compare job, batch and flow production.

Job: one unique product made at a time (e.g. wedding cake). Batch: groups of identical items made together moving through stages (e.g. bread batches). Flow: continuous mass production of identical items on a production line (e.g. cars).

What is lean production and one method used to achieve it?

Lean production aims to reduce all forms of waste (time, materials, labour) while maintaining quality. Methods include Just-In-Time (JIT) stock control, Kaizen (continuous improvement), and cell production.

What is the difference between quality control and quality assurance?

Quality control: inspecting/checking products for faults at the end of production. Quality assurance: building quality into the whole process so faults are prevented at every stage, with all workers responsible for quality (e.g. TQM).

How is productivity (labour productivity) calculated?

$$\text{Labour productivity} = \frac{\text{Total output}}{\text{Number of workers}}$$ It measures output per worker over a period of time.

Define fixed costs, variable costs and total costs with a formula.

Fixed costs do not change with output (e.g. rent). Variable costs change directly with output (e.g. raw materials). $$\text{Total cost} = \text{Total fixed costs} + \text{Total variable costs}$$

How is the break-even level of output calculated?

$$\text{Break-even output} = \frac{\text{Fixed costs}}{\text{Selling price per unit} - \text{Variable cost per unit}}$$ The denominator is the contribution per unit.

What is contribution per unit, and how is total contribution found?

Contribution per unit is selling price per unit minus variable cost per unit: $$\text{Contribution} = P - VC$$ Total contribution = contribution per unit $\times$ number of units sold; it contributes to covering fixed costs and then profit.

What is the margin of safety?

The amount by which actual/current output exceeds the break-even output: $$\text{Margin of safety} = \text{Actual output} - \text{Break-even output}$$ It shows how far sales can fall before the firm makes a loss.

Distinguish internal from external sources of business finance, with examples.

Internal: from within the business — retained profit, sale of assets, owner's savings. External: from outside the business — bank loan, overdraft, share issue, debentures, trade credit, leasing, grants.

Distinguish short-term from long-term sources of finance.

Short-term (repaid within ~1 year) covers day-to-day needs: overdraft, trade credit, short loans. Long-term funds large/permanent investment: bank loans, mortgages, share issue, debentures, retained profit.

What is working capital and how is it calculated?

Working capital is the finance available for day-to-day running of the business. $$\text{Working capital} = \text{Current assets} - \text{Current liabilities}$$

What does a cash flow forecast show, and what is the closing balance formula?

A cash flow forecast predicts the flow of cash into and out of a business over future months. $$\text{Closing balance} = \text{Opening balance} + \text{Net cash flow}$$ where net cash flow = cash inflows − cash outflows.

What does an income statement (profit and loss account) show? Give the gross and net profit formulas.

It shows revenue, costs and profit over a period. $$\text{Gross profit} = \text{Revenue} - \text{Cost of sales}$$ $$\text{Net profit} = \text{Gross profit} - \text{Expenses (overheads)}$$

What does a statement of financial position (balance sheet) record?

A snapshot of a business's assets (non-current and current), liabilities (non-current and current) and capital/equity at a particular point in time, showing what the business owns and owes.

State the formula for the gross profit margin and the net profit margin.

$$\text{Gross profit margin} = \frac{\text{Gross profit}}{\text{Revenue}} \times 100$$ $$\text{Net profit margin} = \frac{\text{Net profit}}{\text{Revenue}} \times 100$$

State the formula for Return on Capital Employed (ROCE).

$$\text{ROCE} = \frac{\text{Net profit (operating profit)}}{\text{Capital employed}} \times 100$$ It measures how efficiently the capital invested is generating profit.

State the formulas for the current ratio and the acid test (quick) ratio.

$$\text{Current ratio} = \frac{\text{Current assets}}{\text{Current liabilities}}$$ $$\text{Acid test ratio} = \frac{\text{Current assets} - \text{Inventory}}{\text{Current liabilities}}$$

What is inflation and how does it affect a business?

Inflation is a sustained rise in the general price level over time. It raises costs of raw materials and wages, can reduce consumer spending power and demand, and creates uncertainty for planning.

How can a rise in interest rates affect a business?

Higher interest rates increase the cost of existing and new loans, reduce business investment and borrowing, and lower consumer demand because consumers spend less and save more (and have higher loan/mortgage repayments).

How does the exchange rate affect importers and exporters? (Use SPICED/WPIDEC logic.)

A strong (high) domestic currency makes imports cheaper and exports dearer; a weak (low) currency makes exports cheaper and more competitive abroad but imports dearer. Remember: Strong Pound = Imports Cheap, Exports Dear (SPICED).

What are the main reasons a government intervenes in/regulates business activity?

To protect consumers (safety, fair pricing), protect employees (employment laws), protect the environment (pollution controls), and ensure fair competition. Firms must comply with relevant legislation.

What does it mean for a business to be socially and environmentally responsible?

Acting in ways that benefit society and the environment beyond legal requirements — e.g. reducing pollution and waste, ethical sourcing, treating workers fairly, and supporting the local community (Corporate Social Responsibility).

What are the potential benefits and drawbacks of globalisation for a business?

Benefits: access to larger global markets, cheaper labour/materials, economies of scale. Drawbacks: greater foreign competition at home, exchange rate risk, cultural/legal differences, and reliance on global supply chains.