Cambridge international as and a level business studies coursebook with cd rom cambridge educatio samples PDF

Preview

Summary

Cambridge International Level business studies...

Description

Cambridge International AS and A Level

Business Studies Second edition

Endorsed by

University of Cambridge International Examinations

Contents Introduction

v

Unit 1 Business and its environment 1 2 3 4 5 6 7

Enterprise Business structure (some A-level material) Size of business (some A-level material) Business objectives Stakeholders in a business External influences on business activity (A level only) External economic influences on business behaviour (A level only)

3 17 41 56 71 83 110

Unit 2 People in organisations 8 9 10 11 12 13

Management and leadership Motivation Human resource management Further human resource management (A level only) Organisation structure (A level only) Business communication (A level only)

141 154 180 195 211 226

Unit 3 Marketing 14 15 16 17 18 19

What is marketing? Market research The marketing mix − product and price The marketing mix − promotion and place Marketing planning (A level only) Globalisation and international marketing (A level only)

243 263 290 313 340 366

Unit 4 Operations and project management 20 21 22 23 24 25

The nature of operations Operations planning (some A-level material) Inventory management Capacity utilisation (A level only) Lean production and quality management (A level only) Project management (A level only)

381 390 419 430 440 462

Unit 5 Finance and accounting 26 27 28 29 30 31 32 33

Business finance Forecasting cash flows Costs (some A-level material) Accounting fundamentals Budgets (A level only) Contents of published accounts (A level only) Analysis of published accounts (A level only) Investment appraisal (A level only)

475 493 507 528 553 563 575 590 C

t

t

iii

Unit 6 Strategic management 34 35 36 37

What is strategic management? (A level only) Strategic analysis (A level only) Strategic choice (A level only) Strategic implementation (A level only)

608 616 631 644

38 Preparing for your examinations

663

Index Acknowledgements

671 680

iv C t t

Introduction Who is this book for? The second edition of this book accurately and comprehensively follows the new Cambridge International AS- and A-level Business Studies syllabus (9707). If you are a student preparing for the examinations based on this syllabus, or a teacher preparing students for the examinations, you can be confident that the book provides complete coverage of the course to the appropriate level. Other students of Business Studies or Business and Management could also benefit greatly from the subject content, activities and advice that this book contains. Students following the AQA, OCR or EDEXCEL A levels, the CIE Pre-U course or the International Baccalaureate Higher and Standard Diploma Programme will also find this an invaluable resource. The first edition was also used in Higher Education institutions as an introductory text for Management and Business Studies degree courses. The changes and additions made to this second edition will reinforce its usefulness for this purpose.

What makes this book different? The key distinctive feature of this book is the international perspective it gives to the study of businesses, strategies and decisions. There are many references to case studies, data and examples from countries all around the world. This is deliberate − very few businesses operate today in a narrow national marketplace and as a Business Studies student you are encouraged to look at business organisations and business decisions from an international viewpoint that accurately mirrors the real world. The focus on business strategic decision making in the final unit means that the book also highlights some very important aspects of business management: • Strategic decision making is holistic and cannot be undertaken effectively by studying a series of unconnected subject areas. • There is no one perfect solution to a business problem – a variety of different strategic solutions might exist that refl ect the objectives of the business, the external environment and the cultures of both the organisation and the country in which it operates.

The differences between AS and A level There are two important differences between the AS- and A-level syllabus (or specification): 1 More subject content is examined at A level than at AS. A-level material is clearly indicated in this book with a logo and a colour bar in the margin of the page (illustrated on the right here). 2 The examination skills are weighted differently – much more emphasis is placed on subject knowledge at AS level but A level puts greater emphasis on analysis and evaluation. These differences are reflected in the types of questions contained in this book and in the suggested answers and the Student’s and Teacher’s CD-ROMs. AS students do not need to study the A-level sections in this book or the associated activities. A-level students and their teachers must remember that the A-level syllabus includes all AS content and, therefore, all sections of this book need to be followed. A-level students should tackle both the AS- and the A-level questions in the book. AS-type questions will also feature on A-level examination papers but they will always be followed by a more demanding part question. Again, this pattern is followed in AS-level and A-level Business Studies.

I t d

ti

v

A

What are the key features of this book?

• • •

• • • • • •

Learning objectives – identifying the content and concepts covered in each chapter. ‘Introducing the topic’ case studies – raising important areas for discussion and giving context to the business applications of the material to be covered in each chapter. Clearly laid-out text – with easy-to-follow subsections and many tables of data and ‘key advantages and disadvantages’. Top tips – helping avoid common errors made by students in examinations. Hundreds of in-chapter activities – giving practice at applying what is being learned, using evidence and data taken mainly from actual business examples. Learning outcomes – reinforcing the issues that should be understood by the end of each chapter. Revision questions – checking on essential understanding and knowledge. Case studies with examination-style questions – testing the skills of application, analysis and evaluation, using real international business situations. Examination-style essay questions – giving practice at writing longer, discursive answers.

What is the CD-ROM for? The CD-ROM attached to this book provides invaluable support to students. It contains: • detailed answers to one activity per chapter – you will have to do the others for yourself! Activities for which an answer is provided on the CD-ROM are marked with a logo

• • • •

in the text

a set of ten multiple-choice questions and answers for every chapter a full glossary of all the Key definitions in the book exemplar marking grids of the kind used by examiners when marking students’ examination answers revision mind maps for every chapter.

There is a second CD available to teachers (ISBN 978-0-521-12693-9) which provides detailed answers to all of the other activities, case studies and essay questions in the book along with suggestions for further reading.

Skills needed by students of Business Studies Your final examinations, both at AS level and A level, will test the following skills: 1 Knowledge and critical understanding of the syllabus content. 2 Application of this knowledge and critical understanding of problems and issues that arise from both familiar and unfamiliar situations. 3 Analysis of problems, issues and situations. This skill can be demonstrated by: • distinguishing between statements of fact and opinion • explaining trends in data and the likely causes of them • examining the implications of a suggested idea or strategy. 4 Evaluation and judgement. This skill can be demonstrated by: • weighing up the reliability of data • discussing and debating issues and arguing points to reach an appropriate decision • discriminating between alternative explanations and strategies • judging the usefulness of the main concepts and models of Business Studies. All of these skills will be developed as you progress through this book, especially if you work through the many questions that are presented for your self-assessment. Chapter 38 gives further details of how examiners assess the four skills and how to prepare for examinations.

vi I t d ti

Using the book Even the keenest student is unlikely to read this textbook from cover to cover in one evening. Instead, it should be used to support and guide your learning as you progress through the syllabus. Make use of the many activities and revision questions to support and assess your learning. The author hopes that the book, as well as providing essential subject support, will achieve two further objectives. Firstly, that it will encourage students to be observant and curious about all forms of business activity. Secondly, that, as a consequence, they will be keen to discover what is happening in business organisations, at international, national and local levels, and to bring these findings into their studies. To this end, there is also the expectation that students will update their knowledge through the frequent use of libraries, newspapers, business-oriented TV programmes and the internet.

Peter Stimpson April 2010

Peter Stimpson (Coursebook author) Peter Stimpson is Head of Business Studies at Hurtwood House School, Surrey. He has over 35 years’ experience in teaching Economics and Business Studies to A-level standard. He is a senior examiner with Cambridge International and UK examination boards. He also trains teachers overseas in A-level syllabus development, teaching methods and examination skills. Alastair Farquharson (CD-ROM author) Alastair Farquharson is a teacher at Scarborough Sixth Form College and has taught A Level Economics and Business Studies for over 20 years. He has been an examiner for Cambridge International Examinations for over 10 years as well as working for a UK examinations board. He also has experience of providing training for teachers overseas in A-level syllabus development, teaching methods and examination skills.

I t d

ti

vii

U nit 1 Unit

Business and its environment

1

Enterprise This chapter covers syllabus section 1AS.1. On completing this chapter, you will be able to: ➤ understand what business activity involves ➤ analyse the meaning and importance of value added ➤ recognise the key characteristics of successful entrepreneurs ➤ assess the importance of enterprise and entrepreneurs to a country’s economy ➤ understand the meaning of social enterprise and the difference between this and other businesses.

Introducing the topic

Dulip starts his business Dulip lives in a large country with many natural resources, such as coal and timber. He plans to start a business growing and cutting trees to sell as timber. He wants to buy a forest from a farmer and cut down a fixed number of trees each year. As Dulip is concerned about the environment of his country, he will plant two new trees for each one he cuts down. He has been planning this business venture for some time. He has visited a bank to arrange a loan. He has contacted suppliers of saws and other equipment to check on prices. Dulip also visited several furniture companies to see if they would be interested in buying wood from the forest. In fact, he did a great deal of planning before he was able to start his business. Dulip is prepared to take risks and will invest his own savings, as well as using the bank loan, to set up the business. He plans to employ three workers to help him to start with. If the business is a success, then he will also try to sell some of the timber abroad. He knows that timber prices are high in some foreign markets. After several months of planning, he was able to purchase the forest. Points to think about: Why do you think Dulip decided to own and run his own business rather than work for another firm? Why was it important to Dulip that he should do so much planning before starting his business? Do you think Dulip will make a successful entrepreneur? Are new businesses such as Dulip’s good for the economy of a country? Give reasons for your answer.

• • • •

Enterprise

3

Introduction Many business managers are paid high salaries to take risks and make decisions that will influence the future success of their business. Much of this book is concerned with how these decisions are made, the information needed to make them and the techniques that can assist managers in this important task. However, no student of Business Studies can hope to make much progress in the study of this subject unless they have a good understanding of the economic environment in which a business operates. Business activity does not take place in isolation from what is going on around it. The very structure and health of the economy will have a great impact on how successful business activity is. The central purpose of this whole unit, ‘Business and its environment’, is to introduce the inter-relationships between businesses, the world in which they operate and the limits that governments impose on business activity. This first chapter explains the nature of business activity and the role of enterprise in setting up and developing businesses.

The purpose of business activity A business is any organisation that uses resources to meet the needs of customers by providing a product or service that they demand. There are several stages in the production of finished goods. Business activity at all stages involves adding value to resources, such as raw materials and semi-finished goods, and making them more desirable to – and thus valued by – the final purchaser of them. Without business activity, we would all still be entirely dependent on the goods that we could make or grow ourselves – as some people in virtually undiscovered native communities still are. Business activity uses the scarce resources of our planet to produce goods and services that allow us all to enjoy a very much higher standard of living than would be possible if we remained entirely selfsufficient.

What do businesses do? Businesses identify the needs of consumers or other firms. They then purchase resources – or factors of production – in order to produce goods and services that satisfy these needs, usually with the aim of making a profit. Before we go on, it will be useful

4 Unit 1: Business and its environment

to explain some important business terms that have either already been used, or will be referred to soon, in this chapter. Business activity exists to produce consumer goods or services that meet the needs of customers. These goods and services can be classified in several ways. KEY DEFINITIONS the physical and tangible goods sold to the general public − they include durable consumer goods, such as cars and washing machines, and non-durable consumer goods, such as food, drinks and sweets that can be used only once

consumer goods

consumer services the non-tangible products sold to the general public − they include hotel accommodation, insurance services and train journeys capital goods the physical goods used by industry to aid in the production of other goods and services, such as machines and commercial vehicles

What do businesses need to produce goods and services? Factors of production These are the resources needed by business to produce goods or services. They include: • Land – this general term includes not only land itself but all of the renewable and non-renewable resources of nature, such as coal, crude oil and timber. • Labour – manual and skilled labour make up the workforce of the business. • Capital – this is not just the finance needed to set up a business and pay for its continuing operations, but also all of the man-made resources used in production. These include capital goods, such as computers, machines, factories, offices and vehicles. • Enterprise – this is the driving force, provided by risk-taking individuals, that combines the other factors of production into a unit capable of producing goods and services. It provides a managing, decision-making and coordinating role. Businesses have many other needs before they can successfully produce the goods and services demanded by customers. Figure 1.1 shows the wide range of these needs.

All businesses need labour

Timber is a natural resource

Capital equipment can be very complex Site for buildings

Raw materials

Finance

Factories/offices

Capital

Land

Machines

Roads/Rail/Airports Customers A business needs

Government

Law and order

Suppliers Schools/Colleges

Enterprise

Labour

Permanent

Skilled Unskilled

Figure 1.1

Temporary

Risk takers

Decision makers

Coordinators

What businesses need

Enterprise

5

The concept of adding value (added value) A business adds value to the raw materials it uses to produce the good or service it sells. Added value is one of the key objectives of any business. If a customer is prepared to pay a price that is much greater than the cost of materials used in making or providing a good or service, then the business has been successful in ‘adding value’.

added value the difference between the cost of

purchasing raw materials and the price the finished goods are sold for

The concept of value added can be illustrated by an example taken from the building industry (see also Figure 1.2). From the value added by the business, other costs have to be paid, such as labour and rent – value added is not the same as profit. However, if a business can increase its value added without increasing its costs, then profit will increase. Here are two examples of how different businesses could add value to their products, but they do increase costs: 1 Jewellers − well-designed shop-window display, attractive shop fittings, well-dressed and

Figure 1.2

Value added

6 Unit 1: Business and its environment

Activity 1.1 [AS/A level − 12 marks, 25 minutes]

KEY DEFINITION

Cost of inputs/materials

2

knowledgeable shop assistants and beautiful boxes offered to customers to put new jewellery in. Sweet manufacturer − extensive advertising of the brand of sweets to create an easily recognised name and brand identity, attractive packaging, selling through established confectionery shops and not ‘cheap’ vending machines.

How could the following businesses add value to the goods they buy in: hotel car dealer clothing manufacturer fast-food restaurant?

• • • •

The role of the entrepreneur KEY DEFINITION entrepreneur someone who takes the financial risk of starting and managing a new venture

New business ventures started by entrepreneurs can be based on a totally new idea or a new way of offering a service. They can also be a new location for an existing

Production process adds value

Value of output of finished goods

business idea or an attempt to adapt a good or service in ways that no one else has tried before. In this chapter, we will be looking at several examples of people who have set up their own new business and h...