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UPDATED TO 2022 SYLLABUS

CAIE IGCSE
BUSINESS
STUDIES (0450)
SUMMARIZED NOTES ON THE SYLLABUS
CAIE IGCSE BUSINESS STUDIES (0450)

becomes part of the 'predator' business [the business

which has taken it over]
1. Definitions 22. A merger is when the owners of two businesses agree
to join their businesses together to make one business
23. Horizontal integration is when one business merges
1.1. Understanding business activity
with or takes over another one in the same industry at
1. A need is a good or service essential for living the same stage of production
2. A want is a good or service which people would like to 24. Vertical integration is when one business merges with
have, but which is not essential for living. People's or takes over another one in the same industry but at
wants are unlimited a different stage of production. Vertical integration
3. Economic Problem- There exist unlimited wants but can be forward or backward.
limited resources to produce the goods and services 25. Conglomerate integration is when one business
to satisfy those wants. This creates scarcity merges with or takes over a business in a completely
4. Factors of production are those resources needed to different industry. This is also known as diversification.
produce goods and services. There are four factors of 26. Sole trader is a business owned by one person
production and they are in limited supply 27. Limited liability means that the liability of shareholders
5. Scarcity is the lack of sufficient products to fulfill the in a company is limited to only the amount they
total wants of the population invested
6. Opportunity cost is the next best alternative given up 28. Unlimited liability means that the owners of a business
by choosing another item can be held responsible for the debts of the business
7. Specialization occurs when people and businesses they own. Their liability is not limited to the investment
concentrate on what they are best at they made in the business
8. Division of labour is when the production process is 29. Partnership is a form of business in which two or more
split up into different tasks and each worker performs people agree to jointly own a business
one of those tasks. It is a form of specialization 30. Unincorporated business is one that does not have a
9. Businesses combine the factors of production to make separate legal identity. Sole traders and partnerships
goods and services which satisfy people's wants are unincorporated businesses
10. Added value is the difference between the selling 31. incorporated businesses are companies that have
price and the cost of bought-in materials and separate legal status from their owners
components 32. Shareholders are the owners of a limited company.
11. The primary sector of industry extracts and uses the They buy shares which represent part-ownership of
natural resources of Earth to produce raw materials the company.
used by other businesses 33. Private limited companies are businesses owned by
12. The secondary sector of industry manufactures goods shareholders but they cannot sell shares to the public.
using the raw materials provided by the primary 34. Public limited companies are businesses owned by
sector shareholders but they can sell shares to the public and
13. The tertiary sector of industry provides services to their shares are tradable on the Stock Exchange
consumers and other sectors of industry 35. Dividends are payments made to shareholders from
14. De -industrialisation occurs when there is a decline in the profits [after tax] of a company. They are the
the importance of the secondary, manufacturing returns to shareholders for investing in the company.
sector of industry in a country 36. A franchise is a business based upon the use of the
15. Mixed economy has both a private sector and a public brand names, promotional logos and trading methods
of an existing successful business. The franchisee
(state) sector
16. Capital is the money invested into the business by the buys the license to operate this business from the
owners franchisor
17. An entrepreneur is a person who organises, operates 37. A joint venture is where two or more businesses start
and takes the risk for a new business venture a new project together, sharing capital, risks and
18. Capital employed is the total value of capital used in profits
the business 38. A public corporation is a business in the public sector
19. Internal Growth occurs when a business expands its that is owned and controlled by the state
existing operations [government]
20. External Growth is when a business takes over or 39. Business objectives are the aims or targets that a
merges with another business. It is often called business works towards
integration as one business is integrated into another 40. Profit is total income of a business [revenue] minus
one total costs
21. A takeover or acquisition is when one business buys 41. Market share is the percentage of total market sales
out the owners of another business, which then held by one brand or business

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42. A social enterprise has social objectives as well as an 24. Staff managers are specialists who provide support,
aim to make a profit to reinvest back into the business information and assistance to line managers.
43. A stakeholder is any person or group with direct 25. Delegation means giving a subordinate the authority
interest in the performance and activities of a to perform particular tasks
business 26. Leadership styles are the different approaches to
dealing with people and making decisions when in
1.2. People in business apposition of authority - autocratic, democratic and
laissez-faire
1. Motivation is the reason why employees want to work 27. Autocratic leadership is where the manager expects
hard and work effectively for the business to be in charge of the business and to have their
2. Wage is a payment for work, usually paid weekly orders followed
3. Time rate is the amount paid to an employee for one 28. Democratic leadership gets other employees involved
hour of work in the decision-making process
4. Piece rate is an amount paid for each unit of output 29. Laissez-faire leadership makes the broad objectives of
5. Salary is payment for work, usually paid monthly. the business known to employees, but then they are
6. Bonus is an additional amount of payment above basic left to make their own decisions and organise their
pay as a reward for good work own work
7. Commission is payment relating to the number of 30. Recruitment is the process from identifying that the
sales made business needs to employ someone up to the point at
8. Profit sharing is a system whereby a proportion of the which applications have arrived at the business
company's profits are paid out to employees 31. Job analysis identifies and records the responsibilities
9. Job satisfaction is the enjoyment derived from feeling and tasks relating to a job
that you have done a good job 32. Job description outlines the responsibilities and duties
10. Job rotation involves workers swapping around and to be carried out by someone employed to do a
doing each specific task for only a limited time and specific job
then changing around again 33. Job specification is a document which outlines the
11. Job enrichment involves looking at jobs and adding requirements, qualifications, expertise, physical
tasks that require more and/or responsibility characteristics, etc., for a specified job
12. Team-working involves using groups of workers and 34. Internal recruitment is when a vacancy is filled by
allocating specific tasks and responsibilities to them someone who is an existing employee of the business
13. Training is the process of improving a worker's skills 35. External recruitment is when a vacancy is filled by
14. Promotion is the advancement of an employee in an someone who is not an existing employee and will be
organisation, for example, to a higher job/managerial new to the business
level 36. induction training is an introduction given to a new
15. Organisational structure refers to the levels of employee, explaining the business's activities,
management and division of responsibilities within an customs and procedures and introducing them to their
organisation fellow workers
16. Organisational chart refers to a diagram that outlines 37. On-the-job training occurs by watching a more
the internal management structure experienced worker doing the job
17. Hierarchy refers to the levels of management in any 38. Off-the-job training involves being trained away from
organisation, from the highest to the lowest. the workplace, usually by specialist trainers.
18. A level of hierarchy refers to 39. Workforce planning is establishing the workforce
managers/supervisors/other employees who are needed by the business for the foreseeable future in
given a similar level of responsibility in an terms of the number and skills of employees required
organisation 40. Dismissal is when employment is ended against the
19. Chain of command is the structure in an organisation will of the employee, usually for not working according
which allows instructions to be passed down from to the employment contract
senior management to lower levels of management 41. Redundancy is when the employee is no longer
20. The span of control is the number of subordinates needed and so loses their job. It is not due to any
working directly under a manger aspect of their work being unsatisfactory
21. Directors are senior managers who lead a particular 42. A contract of employment is a legal agreement
department or a division of a business between an employer and an employee, listing the
22. Line managers have direct responsibility for people rights and responsibilities of workers
below them in the hierarchy of an organisation 43. Communication is the transferring of a message from
23. Supervisors are junior managers who have direct the sender to the receiver, who understands the
control over the employees below them in the message
organisational structure 44. A message is the information or instructions being
passed by the sender to the receiver

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45. Internal communication is communication between product is developed and produced

members of the same organisation 13. Marketing budget is a financial plan for the marketing
46. External communication is communication between of a product or product range for some specific period
the organisation and other organisations or of time. It specifies how much money is available to
individuals market the product or range, so that the Marketing
47. The transmitter or sender of the message is the department may know how much it may spend
person starting off the process by sending the 14. Primary research is the collection and collation of
message original data via direct contact with potential or
48. The medium of communication is the method used to existing customers
send a message, for example, a letter is a method of 15. Secondary research uses information that has already
written communication and a meeting is a method of been collected and is available for use by others
verbal communication 16. A questionnaire is a set of questions to be answered
49. The receiver is the person who receives the message as a means of collecting data for market research
50. Feedback is the reply from the receiver which shows 17. Online surveys require the target sample to answer a
whether the message has arrived, been understood series of questions over the internet
and, if necessary, acted upon 18. Interviews involve asking individuals a series of
51. One-way communication involves a message which questions, often face-to-face or over the phone
does not call for or require a response 19. A focus group is a group of people who are
52. Two-way communication is when the receiver gives a representative of the target market
response to the message and there is a discussion 20. A sample is the group of people who are selected to
about it respond to a market research exercise, such as a
53. Formal communication is when messages are sent questionnaire
through established channels using professional 21. A random sample is when people are selected at
language random as a source of information for market
54. Informal communication is when information is sent research
and received casually using everyday language 22. A quota sample is when people are selected on the
55. Communication barriers are factors that stop effective basis of certain characteristics (such as age, gender
communication of messages or income) as a source of information for market
research
1.3. Marketing 23. The marketing mix is a term which is used to describe
all the activities which go into marketing a product or
1. Marketing is identifying customer wants and satisfying service. These activities are often summarized as the
them profitably four Ps - product, price, place and promotion
2. A customer is a person, business or other 24. The USP is the special feature of a product that
organisation which buys goods or services from a differentiates it from the products of competitors
business 25. The brand name is the unique name of a product that
3. Customer loyalty is when existing customers distinguishes it from other brands
continually buy products from the same business 26. Brand loyalty is when consumers keep buying the
4. Customer relationships is communicating with same brand again and again instead of choosing a
customers to encourage them to become loyal to the competitor's brand
business and its products 27. Brand image is an image or identity given to a product
5. Market share is the percentage of total market sales which gives it a personality of its own and
held by one brand or business distinguishes it from its competitors' brands
6. Consumer buys goods or services for personal 28. Packaging is the physical container or wrapping for a
services- not to re-sell product. It is also used for promotion and selling
7. Mass market is where there is a large number of sales appeal
of a product 29. The product life cycle describes the stages a product
8. Niche market is a small, usually specialised, segment will pass through from its introduction, through its
of a much larger market growth until it is mature, and then finally its decline
9. Market segment is an identifiable sub-group of a 30. Extension strategy is a way of keeping a product at the
whole market in which consumers have similar maturity stage of the life cycle and extending the cycle
characteristics or preferences 31. Cost-plus pricing is the cost of manufacturing the
10. Market research is the process of gathering, analyzing product plus a profit mark-up
and interpreting information about a market 32. Competitive pricing is when the product is priced in
11. Product-orientated business is one whose main focus line with or just below competitors' prices to try to
of activity is on the product itself capture more of the market
12. Market-orientated business is one which carries out 33. Penetration pricing is when the price is set lower than
market research to find out consumer wants before a the competitors' prices in order to be able to enter a

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new market 1. Productivity is the output measured against the inputs

34. Price skimming is where a high price is set for a new used to create it
product on the market 2. The buffer inventory level is the inventory held to deal
35. Promotional pricing is when a product is sold at a very with uncertainty in customer demand and deliveries of
low price for a short period of time supplies
36. Dynamic pricing is when businesses change product 3. Lean production is a term for those techniques used
prices, usually when selling online, depending on the by business to cut down on waste and therefore
level of demand increase efficiency, for example, by reducing the time
37. Price elastic demand is where consumers are very it takes for a product to be developed and become
sensitive to changes in price available for sale.
38. Price inelastic demand is where consumers are not 4. Kaizen is a Japanese term meaning 'continuous
sensitive to changes in price improvement through the elimination of waste
39. A distribution channel is the means by which a product 5. Just-in-time is a production method that involves
is passed from the place of production to the reducing or virtually eliminating the need to hold
consumer inventories of raw materials or unsold inventories of
40. An agent is an independent person or business that is the finished product
appointed to deal with the sales and distribution of a 6. Job production is where a single product is made at a
product or a range of products time
41. Promotion is where marketing activities aim to raise 7. Batch production is where a quantity of one product is
customer awareness, of a product or a brand, made, and then a quantity of another item will be
generating sales and helping to create brand loyalty produced
42. Advertising means paying for communication with 8. Flow production is where large quantities of a product
potential customers about a product to encourage are produced in a continuous process. It is sometimes
them to buy it referred to as mass production
43. informative advertising is where the emphasis of 9. Fixed costs are costs which do not vary in the short run
advertising or sales promotion is to give full with the number of items sold or produced. They have
information about the product to be paid whether the business is making any sales or
44. Persuasive advertising is advertising or promotion not. They are also known as overhead costs.
which is trying to persuade the consumer that they 10. Variable costs are costs which vary directly with the
really need the product and should buy it number of items sold or produced
45. Target audience refers to people who are potential 11. Total costs are fixed and variable costs combined
buyers of a product or a service 12. Average cost per unit (unit cost) is the total cost of
46. Sales promotions are incentives such as special offers production divided by total output
aimed at consumers to achieve short-term increase in 13. Economies of scale are the factors that lead to a
sales reduction in average costs as a business increases in
47. Marketing budget is a financial plan for the marketing size
of a product or a product range for a specified period 14. Diseconomies of scale are the factors that lead to an
of time increase in average costs as a business grows beyond
48. Social media marketing is a form of internet a certain size
marketing that involves creating and sharing content 15. Break-even point is the level of sales at which total
on social media networks in order to achieve costs = total revenue
marketing and branding goals. It includes activities 16. The revenue of a business is the income during a
such as posting text and image updates, videos, and period of time from the sale of goods or services.
other content that achieves audience engagement as 17. Quality means to produce a good or service which
well as paid social media advertising means customer expectations
49. Viral marketing is when consumers are encouraged to 18. Quality control is the checking for quality at the end of
share information online about the products of a the production process; it uses quality inspectors as a
business way of finding any faults
50. E-commerce is the 'online' buying and selling of goods 19. Quality assurance is the checking for quality standards
and services using computer systems linked to the throughout the production process by employees.
internet and apps on mobile (cell) phones
51. A marketing strategy is a plan to combine the right 1.5. Financial information and decisions
combination of the four elements of the marketing mix
for a product or a service to achieve a particular 1. Start-up capital is the finance needed by a new
marketing objective(s) business to pay for essential non- current and current
assets before it can begin trading
1.4. Operations Management 2. Working capital is the finance needed by a business to
pay for its day-to-day activities

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3. Capital expenditure is money spent on non-current 26. Net profit is the profit made by a business after all
assets which will last for more than one year costs have been deducted from revenue. It is
4. Revenue expenditure is money spent on day-to-day calculated by subtracting overhead costs from gross
expenses which do not involve the purchase of a long- profits
term asset, for example, wages or rent 27. Depreciation is the fall in the value of a fixed asset
5. Internal finance is obtained from within the business over time
itself 28. Retained profit is the net profit reinvested back into
6. External finance is obtained from sources outside of the company, after deducting tax and payments to
and separate from the business owners, such as dividends
7. Micro-finance is providing financial services - including 29. The statement of financial position shows the value of
small loans - to poor people not served by traditional a business's assets and liabilities at a particular time
banks 30. Assets are those items of value which are owned by
8. Crowdfunding is funding a project or venture by the business. They may be non- current (fixed) assets
raising money from a large number of people who or currents assets
each contribute a relatively small amount, typically via 31. Liabilities are debts owed by the business. They may
the internet be non-current liabilities or currents liabilities
9. The cash flow of a business is the cash inflows and 32. Non-current assets are items owned by the business
outflows over a period of time for more than one year
10. Cash inflows are the sums of money received by a 33. Current assets are owned by the business and used
business during a period of time within one year
11. Cash outflows are the sums of money paid out by a 34. Non-current liabilities are long-term debts owed by
business during a period of time the business, repaid over more than one year
12. A cash flow cycle shows the stages between paying 35. Current liabilities are short-term debts owed by the
out cash for labour, materials, and so on, and business, repaid in less than one year
receiving cash from the sale of goods 36. Capital employed is shareholders' equity + non-
13. Profit is the surplus after total costs have been current liabilities and is the total long-term and
subtracted from revenue permanent capital invested in a business
14. A cash flow forecast is an estimate of future cash 37. Liquidity is the ability of a business to pay back its
inflows and outflows of a business, usually on a short-term debts
month-by-month basis. This then shows the expected 38. Profitability is the measurement of the profit made
cash balance at the end of each month relative to either the value of sales achieved or the
15. Net cash flow is the difference, each month, between capital invested in the business
inflows and outflows. 39. Illiquid means that assets are not easily convertible
16. Closing cash (or bank balance) is the amount of cash into cash
held by the business at the end of each month. This
becomes next month's opening cash balance. 1.6. External influences on business
17. Opening cash (or bank balance) is the amount of cash
held by the business at the start of the month activity
18. Working capital is the finance needed by a business to
pay for its day-to-day expenses 1. Gross Domestic Product (GDP) is the total value of
19. Accounts are the financial records of a firm's output of goods and services in acountry in one year
transactions 2. Recession is when there is a period of falling GDP
20. Final accounts are produced at the end of the financial 3. Inflation is the increase in the average price level of
year and give details of the profit or loss made over goods and services over time
the year and the worth of the business 4. Unemployment exists when the people who are willing
21. An income statement is a financial statement that and able to work cannot find a job
records the income of a business and all costs 5. Economic growth is when a country's GDP increases-
incurred to earn that income over a period of time. It is more goods and services are produced than in the
also known as a profit and loss account previous year
22. The revenue is the income to a business during a 6. Balance of payments records the difference between
period of time from the sale of goods and services a country's exports and imports
23. The cost of sales is the cost of producing or buying in 7. Real income is the value of income and it falls when
the goods actually sold by the business during a time prices rise faster than money income
period 8. Exports are goods and services sold from one country
24. A gross profit is made when revenue is greater than to other countries
the cost of sales 9. imports are goods and services bought in by one
25. A trading accounts shows how the gross profit of a country from other countries
business is calculated

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10. Exchange rate is the price of one currency in terms of 22. Private benefits of an activity are the gains to a
another business or the consumer of the product
11. Exchange rate appreciation is the rise in the value of a 23. External costs are costs paid for by the rest of society,
currency compared with other currencies other than the business, as a result of business activity
12. Exchange rate depreciation is the fall in value of a 24. External benefits are the gains to the rest of society,
currency compared with other currencies other than the business, as a result of business activity
13. Fiscal policy is any change by the government in tax 25. Social cost = external costs + private costs
rates or public sector spending 26. Social benefit = external benefits + private benefits
14. Direct taxes are paid directly from incomes, eg- 27. Globalization is the term used to describe increases in
income tax or profits tax worldwide trade and movement of people and capital
15. indirect taxes are added to the prices of goods and between countries
taxpayers pay the tax as they purchase the goods, eg- 28. Free trade agreements exist when countries agree to
VAT trade imports/exports with no barriers such as tariffs
16. Disposable income is the level of income a taxpayer or quotas
has after paying income tax 29. An import tariff is a tax placed on imported goods
17. Import tariff is a tax on an imported product when they arrive into the country
18. Import quota is a physical limit on the quantity of a 30. An import quota is a restriction on the quantity of a
product that can be imported product that can be imported
19. Monetary policy is a change in rates by the 31. Protectionism is when a government protects
government or central bank domestic businesses from foreign competition using
20. Supply-side policies aim to increase supply and make tariffs and quotas
the economy more efficient 32. Multinational businesses are those with factories,
21. Private costs of an activity are the costs paid for by a production or service operations in more than one
business or the consumer of the product country

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Business Studies (0450)

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