IGCSE Business Studies:

Questions and Answers

Covering Edexcels IGCSE Business Studies Syllabus

Paul Hoang
Margaret Ducie
Sam Cleary

ISBN: 978-1-905504-67-1

Published by Anforme Ltd.,

Stocksfield Hall, Stocksfield, Northumberland NE43 7TN.
Tel: 01661 844000 Fax: 01661 844111
email: info@anforme.co.uk
www.anforme.com

Contents
Chapter 1.1 - Objectives

Chapter 1.3 - Factors of Production

Chapter 1.4 - Primary, secondary and tertiary activity

Chapter 1.5 - Business Location

10

Chapter 1.6 - Government influences on business activity and objectives

12

Chapter 1.7 - External influences

16

Chapter 1.8 - Judging Success

20

Chapter 2.1 - Internal Organisation

22

Chapter 2.2 - Communication

28

Chapter 2.3 - Recruitment and Selection

32

Chapter 2.4 - Training

35

Chapter 2.5 - Motivation and rewards

38

Chapter 3.1 - External and Internal Sources of Finance

40

Chapter 3.2 - Budgets and cash flow forecasts

43

Chapter 3.3 - Cost and break-even analysis

47

Chapter 3.4 - Financial Statements

51

Chapter 3.5 - Ratios and performance

55

Chapter 4.1 - The Market

67

Chapter 4.2 - The Marketing Mix

69

Chapter 4.3 - Market Research

79

Chapter 5.1 - Economies and Diseconomies of Scale

81

Chapter 5.2 - Methods of production

83

Chapter 5.3 - Productivity

85

Chapter 5.4 - Quality

89

Chapter 1.1
Objectives
Questions
Most businesses will have a mission statement which provides a framework for setting their
objectives. This mission statement sets out the overall purpose of the business. Look at the
examples of mission statements below for two coffee shops.
Coffee Shop 1: We have a passion for coffee and are committed to bringing our customers The
perfect cup anywhere, anytime.
Coffee Shop 2: To inspire and nurture the human spirit one person, one cup and one
neighbourhood at a time.
a. What is meant by business objectives?

(2 marks)

b. Discuss which coffee shop has the better mission statement to enable it to formulate business
objectives.

IGCSE Business Studies: Questions and Answers

(6 marks)

Chapter 1.1

Answers
Answer
1(a)

Marks

What is meant by business objectives?

Valid points could include:

Targets that a business strives to achieve (1)

Examples: survival, market share, profitability or wealth creation (1)
1(b)

Discuss which coffee shop has the better mission statement to enable it to
formulate business objectives.

Valid points in favour of Coffee Shop 1 could include:

Having passion for coffee can help to motivate the workforce (1)
Being committed to customers can help to boost sales (1)
Aiming for the perfect cup of coffee gives staff a sense of direction in terms of
achieving quality (1)

Valid points in favour of Coffee Shop 2 could include:

To inspire and nurture can motivate workers to achieve organisation objectives

(1)

This can help to recruit like-minded people, i.e. staff who want to work for such
a coffee shop (1)

The mission statement hints at growth as a business objective, i.e. one

neighbourhood at a time (1)

A balanced discussion is required for 5-6 marks. A judgment should be made with

justification for full marks. For example, students might argue that Coffee Shop 1

has the better mission statement as it mentions passion and commitment, which
can help to formulate objectives for the staff.

IGCSE Business Studies: Questions and Answers

Chapter 1.1

Chapter 1.3
Factors of Production
Questions
a. For each of the following businesses identify the factors of production used in the production
process, state whether the business is capital-intensive or labour-intensive and explain your
answer:
i. A caf serving coffee, tea and snacks
ii. An advertising company
iii. A firm of painters and decorators
iv. A shoe manufacturer.

(4 x 5 marks)

b. Explain two reasons why the number of workers required in supermarkets has reduced over the
past 20 years.
(4 marks)
c. Explain the benefits of job specialisation to a clothing manufacturer.

IGCSE Business Studies: Questions and Answers

(4 marks)

Chapter 1.3

Answers
Answer
1(a)(i)

Marks

For each of the following businesses identify the factors of production used

in the production process, state whether the business is capital-intensive

or labour-intensive and explain your answer.
A caf serving coffee, tea and snacks
Valid points could include:

Labour-intensive business (1) because the personal skills of the employees

hired to serve customers and the culinary skills of the baker are more

important for the running of the business than the equipment and machinery

used in the kitchen. (1)

Capital e.g. oven, fridge, freezer, microwave, cooking equipment. (1)

Enterprise e.g. skills of manager of caf to attract customers and encourage

people to return, skill of chef/cook to produce high quality bread and cakes,
skilled waiters. (1)

Labour e.g. skilled baker/cook, skilled manager and waiters. (1)

1(a)(ii) For each of the following businesses identify the factors of production used
in the production process, state whether the business is capital-intensive
or labour-intensive and explain your answer.
An advertising company
Valid points could include:
Labour-intensive business (1) because the skilled workers who produce the
creative ideas contribute more to the production process than the computers
and software (1).

Capital e.g. computers, software, office furniture, printers, fax, photocopier.

(1)

Enterprise e.g. skills of managing director to attract new and retain existing
business, skills and creative output of employees. (1)

Labour e.g. skilled workers who can create advertisements, skilled writers,
employees who can use specialised software. (1)

IGCSE Business Studies: Questions and Answers

Chapter 1.3

Answer
1(a)(iii)

Marks

For each of the following businesses identify the factors of production

used in the production process, state whether the business is capitalintensive or labour-intensive and explain your answer.
A firm of painters and decorators
Valid points could include:

Labour-intensive business (1) because the skills and capabilities of the

painters and decorators contribute more to the production process than the

capital equipment used. (1)

Capital e.g. ladders, van/truck to transport equipment, paint brushes, rollers

etc. (1)

Enterprise e.g. skills of managing director to attract new and retain existing
business, skills and creative output of employees. (1)

Labour e.g. skilled painters. (1)

1(a)(iv)

For each of the following businesses identify the factors of production

used in the production process, state whether the business is capitalintensive or labour-intensive and explain your answer.
A shoe manufacturer
Valid points could include:
Capital-intensive business. (1)

Capital e.g. specialised machinery, sewing equipment, tools. (1)

Enterprise e.g. skills of managing director to attract new and retain existing
business (1), skills and creative output of employees. (1)

Labour e.g. skilled workers and unskilled workers. (1)

1(b)

Explain two reasons why the number of workers required in supermarkets

has reduced over the past 20 years.
Any one from:
Bar codes are placed on goods rather than price tags (1) and therefore
fewer employees are needed to place prices on goods. (1)

Cash registers automatically update stock records (1) so fewer employees

are required to record sales of stock and monitor stock levels in a warehouse.
(1)

Self-service checkouts exist in some supermarkets (1) and therefore fewer

cashiers are required. (1)

Award up to 2 marks for each explanation.

IGCSE Business Studies: Questions and Answers

Chapter 1.3

Answer
1(c)

Marks

Explain the benefits of job specialisation to a clothing manufacturer.

Valid points could include:

The production process can be broken down into several tasks (1) e.g. cutting,

sewing, attaching zips and buttons, ironing, finishing including labels and tags
(1) and this encourages job specialisation (1)

Job specialisation enables workers to become more skilled in the task, which

increases productivity and possibly produces goods of a better quality (1).

Job specialisation allows more goods to be produced in the same time frame
(1).

Award up to 2 marks for each explanation.

IGCSE Business Studies: Questions and Answers

Chapter 1.3

Chapter 1.4
Primary, secondary and tertiary activity
Questions
Unglerts Bakery Ltd. produces bread and cakes for sale in its 20 shops located across Southern
Germany. The bakery needs goods and services from the primary, secondary and tertiary sectors
to make the bread and cakes and to sell the goods to customers.
a. Explain what is meant by the interdependence of primary, secondary and tertiary sectors by
using two examples from Table 1.4a.

(4 marks)

b. Give two examples of businesses in the primary sector that Unglerts Bakery Ltd. might trade
with.

(2 marks)

c. Give two examples of businesses in the tertiary sector that Unglerts Bakery Ltd. might trade
with.

(2 marks)

Table 1.4a
Sector

Examples of goods/services provided

Primary sector

Ingredients: flour, sugar, butter, eggs, yeast

Tertiary sector

Advertising, insurance, banking, shops to sell the bread and cakes

Secondary sector

Production of cakes and bread

d. Produce a table similar to the above for:

i. A mobile phone manufacturer
ii. A fast food restaurant
iii. A shop selling kitchen equipment
iv. A pig farmer.

IGCSE Business Studies: Questions and Answers

(4 x 6 marks)

Chapter 1.4

Answers
Answer
1(a)

Marks

Unglerts Bakery Ltd. produces bread and cakes for sale in its 20 shops
located across Southern Germany. The bakery needs goods and services
from the primary, secondary and tertiary sectors to make the bread and cakes
and to sell the goods to customers.

Explain what is meant by the interdependence of primary, secondary and tertiary

sectors by using two examples from Table 1.4a.
Valid points could include:

Interdependence means that the sectors of industry are dependent upon each
other and cannot work in isolation or without each other (1)

For example:

Ingredients from the primary sector(1) are used in the production of bread and
cakes in the secondary sector (1)

Unglerts Bakery Ltd. will have to buy insurance (1) from the tertiary sector (1)
for the premises and employees

Unglerts Bakery Ltd. will have a bank account (1) and possibly a bank loan
from the tertiary sector.

Unglerts Bakery Ltd. may use the services of an advertising agency (1) from
the tertiary sector (1) to design an advertising campaign for the company.

1(b)

Give two examples of businesses in the primary sector that Unglerts Bakery
Ltd. might trade with.

Examples could include:

Farmer who produces flour, eggs, butter, milk (1)

Energy is required to fuel ovens and provide lighting and heating to the shops
(1)

Award 1 mark for each example

1(c)

Give two examples of businesses in the tertiary sector that Unglerts Bakery
Ltd. might trade with.

Examples could include:

Bank for finance and banking services (loan, financial advice) (1)
Wholesaler to buy in bulk sugar, icing sugar, baking powder, salt (1)
2

An accountant to produce accounts and audit accounts (1)

An advertising agency to produce an advertising campaign (1)
An insurance company for insurance for the buildings and employees to protect
against injury (1)

Award 1 mark for each example

IGCSE Business Studies: Questions and Answers

Chapter 1.4

Answer
1(d)(i)

Marks

Mobile phone manufacturer

Sector

Examples of goods/service provided

Secondary

Production of mobile phones, purchase of components for

Primary

Tertiary

Metal for components, copper for wiring, oil to make plastic (2)
phones from other manufacturers e.g. battery, circuit board,
memory card (2)

Advertising agency, transport company to deliver the phones

from the factory to the retail shops, banking, advertising,
insurance (2)

1(d)(ii)

Fast Food restaurant

Sector

Examples of goods/service provided

Secondary

Production of food for customers, purchase of ingredients from

Primary

Tertiary

Meat, eggs, salad ingredients, fish, milk, tea, coffee (2)

other manufacturers e.g. cheese, tomato sauce, pickles (2)

Advertising agency, banking, advertising, insurance, interior

design of restaurants (2)

1(d)(iii) A shop selling kitchen equipment

Sector
Examples of goods/service provided
Primary

Raw materials to make the kitchen products e.g. clay, metal, oil

Secondary

Manufacture of raw materials into finished kitchen products (2)

Tertiary

1(d)(iv) A pig farmer

Sector
Primary

Secondary
Tertiary

for plastics, wood (2)

Advertising, insurance, accountancy services, banking, transport

to deliver products to shops, interior design of shops (2)
Examples of goods/service provided

Pigs, water, straw, workers to tend to the pigs (2)

Pig food, pens and houses for the pigs to sleep in (2)

Vets to vaccinate the animals and tend to them when they are ill,
transport to take the pigs to market (2)

IGCSE Business Studies: Questions and Answers

Chapter 1.4

Chapter 1.5
Business Location
Questions
Benn and Sons is an engineering company based in Iowa, USA. It provides technical assistance
and maintenance to the airline industry. They are located in Des Moines, the state capital, 60 miles
away from the airport where their customers are based. They are considering moving closer to the
airport, where land is cheaper and the government is considering tax breaks for businesses that
move to the area. The trade union that represents the majority of the staff has expressed concerns
about the commuting time that staff will face.
a. Evaluate the proposed move to a site nearer to the airport.

IGCSE Business Studies: Questions and Answers

Chapter 1.5

(6 marks)

10