recommend and justify which method of advertising to use in a given situation

IGCSE Business Studies (0450) – Complete Revision Notes

How to Use These Notes

• Read each unit’s Learning Objective first – it tells you exactly what the exam expects.
• Study the Key Concepts and use the Checklists to see if you have covered every point.
• Complete the Practice Activities – they mimic the data‑response and case‑study tasks in Paper 1 and Paper 2.
• For any decision‑making question, copy the relevant Decision‑Matrix template into your notebook and adapt the criteria/weights to the scenario.

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1 Understanding Business Activity

Learning Objective

Explain the purpose of business, classify businesses, identify stakeholders and objectives, describe a basic business plan and outline government support for start‑ups.

Key Concepts

• Purpose of Business – produce goods/services, satisfy needs, make a profit (or achieve social/ethical aims for non‑profits).
• Classification
  • Sector: Primary, Secondary, Tertiary.
  • Ownership: Private (sole trader, partnership, limited company) vs. Public (shares on a stock exchange).
  • Size: Micro, Small, Medium, Large – measured by employees, turnover or assets.
• Stakeholders – owners/shareholders, employees, customers, suppliers, government, community, lenders.
• Business Objectives
  • Profit maximisation, growth, market share, survival, CSR.
  • SMART – Specific, Measurable, Achievable, Relevant, Time‑bound.
• Business Plan (basic outline)
  1. Executive summary – what the business does.
  2. Market analysis – target market, competition.
  3. Marketing mix – 4 Ps.
  4. Operations – location, production method.
  5. Financial projections – start‑up costs, break‑even, cash‑flow forecast.
• Government Support for Start‑ups
  • Grants & loans (e.g., UK Business Growth Fund, EU Horizon programmes).
  • Tax incentives – R&D tax relief, reduced corporation tax for small profits.
  • Advice & training – local enterprise partnerships, chambers of commerce.

Simple Classification Table

Sector	Example	Typical Ownership
Primary	Wheat farming	Sole trader / partnership
Secondary	Car manufacturing	Limited company (public or private)
Tertiary	Online streaming service	Public limited company

Checklist for a Strong Answer

• Define the term asked for.
• Give a relevant example (real or hypothetical).
• Link the example to the definition and explain why it fits.
• If required, evaluate advantages and disadvantages.

Practice Activity

Classify the following businesses and state one advantage and one disadvantage of each ownership type:

1. a family‑run bakery
2. a multinational smartphone maker
3. a local council‑run library

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2 People in Business

Learning Objective

Describe how businesses motivate, organise and manage people; evaluate recruitment, training and legal controls; and assess the impact of trade unions, downsizing and delegation.

Key Concepts

• Motivation Theories
  • Maslow’s hierarchy of needs.
  • Herzberg’s two‑factor theory (hygiene vs. motivators).
  • Intrinsic vs. extrinsic rewards.
• Organisational Structure
  • Flat vs. tall hierarchy.
  • Functional, divisional and matrix structures.
• Leadership & Management
  • Leadership styles – autocratic, democratic, laissez‑faire.
  • Management functions – planning, organising, leading, controlling.
  • Delegation vs. control – giving responsibility while maintaining standards.
• Recruitment & Selection
  • Internal vs. external recruitment.
  • Selection methods – interview, test, assessment centre, references.
• Training & Development
  • Induction, on‑the‑job, off‑the‑job, e‑learning.
  • Cost‑benefit analysis of training programmes.
• Legal Controls (Key Employment Legislation)

Key Employment Legislation – Quick Reference

Legislation	What It Covers	Typical Employer Requirement
Minimum Wage Act	National minimum hourly rate	Pay at least the statutory rate to all eligible workers.
Health & Safety at Work Act	Workplace safety, risk assessments	Provide safe environment, training and equipment.
Equality Act	Prevents discrimination (age, gender, disability, etc.)	Equal recruitment, pay and treatment.
Working Time Regulations	Maximum weekly hours, rest breaks, paid holidays	Track hours, give 20 days annual leave.

• Trade Unions & Industrial Relations – collective bargaining, strikes, lock‑outs.
• Downsizing & Redundancy – reasons, procedures, impact on morale.

Decision‑Matrix: Choosing a Recruitment Method

Criteria	Weight (1‑5)	Internal Posting	Online Job Board	Recruitment Agency
Cost	5	5	3	2
Speed of hiring	4	2	4	5
Quality of applicants	3	3	4	5
Control over selection process	2	5	3	2
Employer‑brand impact	1	4	2	1
Total weighted score		5×5 + 2×4 + 3×3 + 5×2 + 4×1 = 58	3×5 + 4×4 + 4×3 + 3×2 + 2×1 = 61	2×5 + 5×4 + 5×3 + 2×2 + 1×1 = 66

Checklist for a Strong HR Answer

• Identify the HR issue (e.g., motivation, recruitment).
• Explain the relevant theory, model or legislation.
• Apply it to the given business context with concrete examples.
• Evaluate advantages and disadvantages.
• Conclude with a justified recommendation.

Practice Activity

Company X wants to improve staff morale after a recent restructuring. Suggest two motivational techniques, explain how each works, and evaluate any possible drawbacks.

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3 Marketing

Learning Objective

Analyse market information, segment markets, develop a marketing mix, evaluate promotion strategies and consider ethical/legal controls and market‑entry decisions.

3.1 The Role of Marketing

• Identifies and satisfies customer needs.
• Helps achieve business objectives (sales growth, market share, profitability).
• Provides information for product development and pricing.

3.2 Market Research & Segmentation

• Primary research – surveys, interviews, observations, focus groups.
• Secondary research – published statistics, trade reports, company accounts.
• Segmentation criteria – demographic, geographic, psychographic, behavioural.

3.3 The Marketing Mix (4 Ps)

1. Product – features, quality, branding, packaging, warranty.
2. Price – objectives, methods (cost‑plus, penetration, skimming), discounts, terms of sale.
3. Place (Distribution) – channels, logistics, location, coverage, e‑commerce.
4. Promotion – advertising, sales promotion, public relations, personal selling, direct marketing.

3.4 Promotion – Recommending and Justifying an Advertising Method

Key Concepts

• Advertising = paid, non‑personal communication aimed at a target market.
• Common media: television, radio, newspapers, magazines, internet (social media, banner ads, video), outdoor (billboards, bus shelters), direct mail, cinema.

Factors to Consider

1. Target‑market characteristics – age, gender, interests, media habits.
2. Product type – high‑involvement vs. low‑involvement, durable vs. perishable.
3. Budget – total spend and cost per medium.
4. Geographic reach – local, regional, national, international.
5. Message complexity – need for visual demonstration, sound, interactivity.
6. Timing – seasonal peaks, launch dates, campaign length.
7. Competitive environment – rivals’ media usage, market saturation.

Decision‑Making Process

1. Analyse the situation (product, market, budget, objectives).
2. Identify suitable media based on the factors above.
3. Compare at least two alternatives using a decision matrix.
4. Select the best option and justify it, linking each point to a specific criterion.

Decision‑Matrix Template (editable)

Criteria	Weight (1‑5)	Television	Social Media	Billboard
Reach of target market	5	4	5	3
Cost per exposure (CPM)	4	2	5	4
Message complexity (visual & audio)	3	5	3	2
Geographic focus	2	2	2	4
Timing flexibility	1	5	5	2
Total weighted score		4×5 + 2×4 + 5×3 + 2×2 + 5×1 = 57	5×5 + 5×4 + 3×3 + 2×2 + 5×1 = 71	3×5 + 4×4 + 2×3 + 4×2 + 2×1 = 49

Sample Situations & Recommendations

Situation	Key Facts	Recommended Advertising Method	Justification (linked to criteria)
New energy drink for 16‑25‑year‑olds	National launch, £150 k budget, high visual appeal, target spends most time online.	Social‑media advertising (Instagram, TikTok, YouTube)	Reach: platforms are the primary media for the age group (Weight 5, Score 5). Cost: lower CPM than TV, fits budget (Weight 4, Score 5). Message: video demos & user‑generated content showcase energy boost (Weight 3, Score 5). Timing: instant launch and rapid adjustments (Weight 1, Score 5).
Luxury car launch in a major city	High‑involvement product, affluent local market, £500 k budget, need to convey prestige.	Television (prime‑time) + high‑end magazine adverts	Reach & impact: TV provides high‑quality visual/audio reinforcing luxury (Weight 5, Score 4). Target reads premium magazines (Weight 4, Score 4). Budget allows selective high‑cost media (Weight 4, Score 4). Geographic focus: both can be limited to the city (Weight 2, Score 4).
Local bakery – new gluten‑free range	Small town, £5 k budget, health‑conscious families, need immediate awareness.	Local newspaper + flyer distribution	Cost: low‑cost media fits £5 k limit (Weight 4, Score 5). Reach: newspaper widely read by local families (Weight 5, Score 4). Geographic focus: hyper‑local coverage (Weight 2, Score 5). Message simplicity: flyers list ingredients & benefits (Weight 3, Score 4).

Checklist for a Strong Advertising Recommendation

• State the chosen method(s) clearly.
• Link each justification point to a specific factor (target market, budget, reach, etc.).
• Include quantitative evidence where possible (e.g., CPM, audience figures).
• Identify any drawbacks and suggest mitigation (e.g., supplement TV with online teasers).
• Conclude by showing how the method supports the overall marketing objectives.

Ethical & Legal Controls on Marketing

• Misleading advertising – must not contain false claims or exaggerations.
• Comparative advertising – must be verifiable and not disparage competitors unfairly.
• Product safety – adverts for food, toys, medicines must comply with safety regulations.
• Data protection – online advertising must respect GDPR / Data Protection Act.
• Targeting vulnerable groups – special rules for children’s advertising.

Entering a New Market – Quick Checklist

1. Market research – size, growth, cultural preferences.
2. Segmentation & positioning – identify niche or mass‑market approach.
3. Adapt the 4 Ps to local conditions (e.g., price sensitivity, distribution channels).
4. Legal & ethical compliance – labelling, advertising standards, import regulations.
5. Entry mode – export, franchising, joint venture, wholly‑owned subsidiary.
6. Financial forecast – projected sales, break‑even, cash‑flow.

Practice Activity

Brief: A start‑up is launching a portable solar charger for outdoor enthusiasts (20‑45 years). National launch, £80 k budget, key selling points: durability and eco‑friendliness. Recommend the most appropriate advertising method and justify your choice.

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4 Operations Management

Learning Objective

Explain how businesses produce goods and services efficiently, analyse costs, quality and location decisions, and use break‑even and productivity tools.

Key Concepts

4.1 Production vs. Productivity

• Production – total output of goods/services in a period.
• Productivity – ratio of output to input (e.g., units per labour hour).
• Increasing productivity lowers average cost and can raise profit.

4.2 Types of Production

Type	Typical Output	Examples
Job production	One‑off, custom	Bespoke furniture, tailor‑made suits
Batch production	Limited runs of similar items	Baked goods, seasonal clothing
Flow (mass) production	Large volumes, identical	Cars, smartphones
Continuous production	24‑hour operation, often automated	Electricity, chemicals

4.3 Technology & Lean Production

• Automation – robots, computer‑controlled machinery.
• Just‑in‑Time (JIT) – minimise inventory, produce when needed.
• Kaizen – continuous small improvements.
• Benefits: lower waste, reduced costs; Risks: dependence on suppliers, downtime.

4.4 Costs

• Fixed costs – do not vary with output (rent, salaries).
• Variable costs – change with output (raw materials, hourly wages).
• Total cost = Fixed + Variable.
• Average cost = Total cost ÷ Output.
• Marginal cost – cost of producing one additional unit.

4.5 Economies & Diseconomies of Scale

• Economies of scale – lower average cost as output rises (specialisation, bulk buying).
• Diseconomies of scale – higher average cost when a firm becomes too large (coordination problems, bureaucracy).

4.6 Break‑Even Analysis

• Break‑Even Point (BEP) = Fixed Costs ÷ (Selling Price – Variable Cost per unit).
• Margin of Safety = (Actual/Projected sales – BEP) ÷ Actual/Projected sales × 100 %.

Break‑Even Chart – Key Features

• Vertical axis – cost/revenue (£).
• Horizontal axis – units produced/sold.
• Three lines: Total Fixed Cost (horizontal), Total Cost (upward sloping), Total Revenue (steeper upward sloping).
• The intersection of Total Cost and Total Revenue is the BEP.

4.7 Quality Management

• Quality Control (QC) – checking output against standards (inspection, testing).
• Quality Assurance (QA) – processes that prevent defects (standard operating procedures, ISO 9001).
• Total Quality Management (TQM) – organisation‑wide commitment to continuous improvement.

4.8 Location & Relocation Decisions

• Factors: proximity to market, raw materials, labour availability, transport links, utilities, government incentives, legal restrictions (zoning, environmental permits).
• Relocation costs: plant & equipment, redundancy payments, loss of customers, training new staff.

Decision‑Matrix: Choosing a New Production Location

Criteria	Weight (1‑5)	Site A – Industrial park (north)	Site B – City centre (south)	Site C – Overseas (EU)
Proximity to market	5	3	5	2
Labour costs	4	4	2	5
Transport links	3	5	3	4
Government incentives	2	2	3	5
Legal & regulatory barriers	1	5	4	2
Total weighted score		3×5 + 4×4 + 5×3 + 2×2 + 5×1 = 58	5×5 + 2×4 + 3×3 + 3×2 + 4×1 = 58	2×5 + 5×4 + 4×3 + 5×2 + 2×1 = 71

Checklist for a Strong Operations Answer

• Define the term (e.g., productivity, economies of scale).
• Explain the principle with a clear diagram or formula.
• Apply to the given business – use real numbers where possible.
• Evaluate advantages/disadvantages or risks.
• Conclude with a recommendation or implication for the business.

Practice Activity

ABC Ltd produces 10 000 units of a gadget each month. Fixed costs = £120 000, variable cost per unit = £8, selling price = £15.
(a) Calculate the break‑even point in units and £.
(b) If the company wants to increase output to 15 000 units, discuss two ways it could achieve higher productivity.

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5 Financial Information & Decisions

Learning Objective

Explain how businesses obtain finance, analyse financial statements, use budgeting and break‑even techniques, evaluate profitability and liquidity, and assess investment options.

Key Concepts

5.1 Business Finance Needs & Sources

• Internal finance – retained earnings, sale of assets, owner’s capital.
• External finance – short‑term – overdraft, trade credit, commercial paper.
• External finance – long‑term – term loan, hire‑purchase, leasing, debentures, equity (shares), government grants.
• Pros & cons (cost, control, risk) should be weighed for each source.

5.2 Cash Flow

• Cash inflows – sales receipts, loans, investment income.
• Cash outflows – purchases, wages, interest, tax, capital expenditure.
• Cash‑flow forecast – monthly projection to avoid shortfalls.

5.3 Budgets

• Sales budget → production budget → cash budget → master budget.
• Flexible budgets adjust for actual activity levels.
• Variance analysis – compare actual vs. budgeted figures.

5.4 Break‑Even & Cost‑Volume‑Profit (CVP) Analysis

• Break‑Even Point (see Unit 4) – also expressed in £.
• Margin of safety – indicates risk of loss.
• Contribution margin = Selling price – Variable cost per unit.

5.5 Ratio Analysis

Ratio	Formula	Interpretation
Gross profit margin	(Gross profit ÷ Sales) × 100	How much profit after direct costs.
Net profit margin	(Net profit ÷ Sales) × 100	Overall profitability.
Current ratio	Current assets ÷ Current liabilities	Short‑term liquidity.
Quick ratio	(Current assets – Stock) ÷ Current liabilities	Liquidity excluding inventory.
Return on capital employed (ROCE)	Operating profit ÷ Capital employed × 100	Efficiency of capital use.
Debt‑to‑equity ratio	Total debt ÷ Shareholders’ equity	Financial risk.

5.6 Investment Appraisal

• Payback period – time to recover initial outlay (simple, ignores time value).
• Average Rate of Return (ARR) – average annual profit ÷ initial investment × 100.
• Net Present Value (NPV) – present value of cash inflows – present value of outflows (requires discount rate).
• Internal Rate of Return (IRR) – discount rate that makes NPV = 0 (advanced, optional for A‑Level).
• Decision rule: accept if NPV > 0, ARR > required rate, payback ≤ acceptable period.

Decision‑Matrix: Evaluating Two Investment Options

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Criteria	Weight (1‑5)	Option A – New CNC machine	Option B – Outsource production
Initial cost	5	2	5
Impact on quality	4	5	3
Flexibility of output	3	4	5
Long‑term cost savings	4	5	3
Risk (technology/partner)