Cambridge IGCSE Business Studies: Structured Questions (20 Qs)
Cambridge (CIE) IGCSE Business Studies: Structured Questions
This section presents a series of structured questions designed to test your understanding of key concepts in Cambridge IGCSE Business Studies. Attempt all questions and refer to the answer key for guidance.
Questions
Question 1:
(a) Define 'opportunity cost'. [2]
(b) Explain two reasons why a new business might fail in its first year. [4]
Question 2:
ABC Ltd. manufactures furniture. It operates in a competitive market.
(a) Identify two different types of business objectives ABC Ltd. might have. [2]
(b) Explain how setting business objectives can benefit ABC Ltd. [4]
Question 3:
(a) State two differences between a sole trader and a partnership. [2]
(b) Discuss the advantages and disadvantages for a business of changing from a sole trader to a private limited company. [6]
Question 4:
Identify and explain two short-term sources of finance available to a business. [6]
Question 5:
Refer to Maslow's Hierarchy of Needs.
(a) State two needs from Maslow's Hierarchy that can be satisfied through non-financial methods. [2]
(b) Explain two ways a manager can motivate employees using non-financial methods. [4]
Question 6:
(a) Outline two stages in the recruitment process of a new employee. [2]
(b) Discuss the benefits and limitations to a business of training its employees externally. [6]
Question 7:
(a) Define 'market research'. [2]
(b) Explain the difference between primary and secondary market research, giving an example of each. [4]
Question 8:
A new smartphone company is launching its first product.
(a) Identify two pricing strategies it could use. [2]
(b) Explain how two elements of the marketing mix, other than price, could be used to successfully launch the smartphone. [6]
Question 9:
(a) State two methods of promotion a business could use for a new product. [2]
(b) Discuss the factors a business should consider when choosing an appropriate promotional mix. [6]
Question 10:
(a) Outline the main difference between 'job production' and 'flow production'. [2]
(b) Explain two benefits to a business of using lean production methods. [4]
Question 11:
A small bakery needs to manage its stock of ingredients effectively.
(a) Identify two costs associated with holding too much stock. [2]
(b) Explain two benefits of effective inventory management for the bakery. [4]
Question 12:
(a) Define 'quality control'. [2]
(b) Explain two ways in which poor quality products can negatively impact a business. [4]
Question 13:
A business has fixed costs of $10,000, variable costs per unit of $5, and a selling price per unit of $15.
(a) Calculate the break-even point in units. [2]
(b) Explain one way the business could lower its break-even point. [2]
Question 14:
(a) Identify two components of a business's income statement. [2]
(b) Explain how an income statement is useful to stakeholders of a business. [4]
Question 15:
(a) State two items found under 'current assets' on a Statement of Financial Position. [2]
(b) Explain the importance of working capital for a business. [4]
Question 16:
(a) Define 'globalisation'. [2]
(b) Explain two opportunities created by globalisation for a business. [4]
Question 17:
(a) Outline two advantages for a business of having a wide span of control. [2]
(b) Discuss the impact of different communication methods (e.g., verbal, written, visual) on business efficiency. [6]
Question 18:
A clothing manufacturer decides to outsource its customer service operations to another country.
(a) Identify two reasons why the manufacturer might do this. [2]
(b) Explain two potential disadvantages of outsourcing business activities. [4]
Question 19:
(a) State two ways in which government legislation might affect business operations. [2]
(b) Discuss the potential benefits and drawbacks for a business of operating in a more ethically responsible way. [6]
Question 20:
A country's government plans to increase the minimum wage for all workers.
(a) Identify two possible stakeholders affected by this decision. [2]
(b) Explain two potential effects of an increase in the minimum wage on businesses. [6]
Answer Key
Question 1:
(a) Opportunity cost: The next best alternative foregone when a decision is made. [2]
(b) Two reasons for business failure: Lack of capital/finance (unable to fund operations, buy stock); Poor management skills (e.g., poor decision making, lack of experience); Intense competition (unable to compete on price/quality); Poor market research (wrong product/service, no demand); Economic downturn (reduced consumer spending). [4]
Question 2:
(a) Two business objectives: Profit maximisation, Growth, Survival, Market share, Customer satisfaction, Social/ethical objectives. [2]
(b) Benefits of setting objectives: Provides direction for the business; Motivates employees; Allows for performance measurement; Helps in decision-making and resource allocation; Improves coordination. [4]
Question 3:
(a) Differences: Sole trader has unlimited liability, partnership has unlimited liability (usually); Sole trader is run by one person, partnership by 2-20 partners; Sole trader keeps all profit, partners share profit. [2]
(b) Advantages of changing to private limited company: Limited liability for owners; Easier to raise capital (by selling shares); Continuity of existence; More professional image; Easier to obtain loans. Disadvantages: More legal formalities and costs; More financial information disclosed publicly; Shares cannot be sold to general public; Potential for loss of control if many shareholders. [6]
Question 4:
Two short-term sources of finance:
1. Overdraft: Allows a business to withdraw more money than is available in its bank account, up to an agreed limit. Useful for covering temporary cash shortages.
2. Trade credit: Suppliers allow a business to buy goods/services and pay for them at a later date (e.g., 30-90 days). Acts as an interest-free loan for a short period.
Other options: Short-term bank loans, factoring, grants. [6]Question 5:
(a) Two needs: Social needs (belonging, friendship); Esteem needs (recognition, respect); Self-actualisation (achieving potential). [2]
(b) Two non-financial motivation methods:
1. Job enrichment: Giving employees more challenging and varied tasks, increasing responsibility and sense of achievement.
2. Teamwork: Organising employees into teams can satisfy social needs and promote a sense of belonging and shared achievement.
Other options: Delegation, training, praise/recognition, good working conditions. [4]Question 6:
(a) Two stages in recruitment: Job analysis (identifying tasks/skills); Job description/person specification (documenting requirements); Advertising the vacancy; Shortlisting candidates; Interviews; Selection tests; Offer of employment. [2]
(b) Benefits of external training: Access to specialist trainers/expertise; New ideas/perspectives brought into the business; Employees gain formal qualifications; Can be more motivating for employees; No disruption to internal work. Limitations: Can be expensive; May not be specific to the business's needs; Time away from work reduces productivity; May not directly apply to the job role; Employees might leave after training. [6]
Question 7:
(a) Market research: The process of gathering, analysing and interpreting information about a market. [2]
(b) Primary vs. Secondary market research: Primary research involves collecting new data directly from original sources (e.g., surveys, interviews, focus groups) specifically for the current purpose. Secondary research involves collecting and using existing data that has already been gathered for another purpose (e.g., government statistics, market reports, company sales data). [4]
Question 8:
(a) Two pricing strategies: Penetration pricing, Skimming pricing, Competitive pricing, Cost-plus pricing, Psychological pricing. [2]
(b) Two elements of marketing mix (other than price):
1. Product: Emphasise unique features, design, or quality of the smartphone to differentiate it from competitors and appeal to the target market.
2. Promotion: Use extensive advertising campaigns (social media, TV, billboards), public relations, and sales promotions (e.g., introductory offers) to create awareness and generate excitement for the launch.
Other options: Place/Distribution – ensure wide availability in retail stores and online channels for customer convenience. [6]Question 9:
(a) Two methods of promotion: Advertising, Sales promotion, Public relations, Personal selling, Sponsorship, Direct marketing. [2]
(b) Factors to consider when choosing promotional mix:
1. Target audience: Which methods effectively reach the intended customers? (e.g., social media for youth).
2. Product type: Consumer goods may need mass advertising, industrial goods might need personal selling.
3. Budget: Costs of different methods vary significantly.
4. Stage in product life cycle: Introduction stage needs awareness, maturity needs reminding.
5. Competitors' activities: What are rivals doing?
6. Marketing objectives: What is the goal (e.g., increase sales, build brand image)? [6]Question 10:
(a) Job production produces single, custom-made products, while flow production produces large volumes of identical products in a continuous process. [2]
(b) Two benefits of lean production:
1. Reduced waste: Minimises waste of materials, time, and labour, leading to lower costs.
2. Improved efficiency: Streamlined processes and just-in-time inventory reduce bottlenecks and lead times.
Other options: Better quality, increased flexibility, improved customer satisfaction. [4]Question 11:
(a) Two costs of holding too much stock: Storage costs (rent, utilities for warehouse); Obsolescence/spoilage costs (food going bad, outdated stock); Opportunity cost of capital (money tied up in stock); Insurance costs; Security costs. [2]
(b) Two benefits of effective inventory management:
1. Reduced costs: Minimises storage, spoilage, and holding costs, leading to higher profitability.
2. Improved customer satisfaction: Ensures products are available when needed, preventing stockouts and lost sales.
Other options: Reduced waste, better cash flow, more efficient production. [4]Question 12:
(a) Quality control: Checking products at various stages of production (or at the end) to ensure they meet required standards. [2]
(b) Two negative impacts of poor quality products:
1. Damaged reputation/brand image: Leads to loss of customer trust and negative publicity, making it harder to attract new customers.
2. Lost sales/customers: Dissatisfied customers will switch to competitors, reducing revenue and market share.
Other options: Increased warranty claims/returns, higher costs (rework, waste), legal action. [4]Question 13:
(a) Contribution per unit = $15 - $5 = $10. Break-even point = Fixed Costs / Contribution per unit = $10,000 / $10 = 1,000 units. [2]
(b) One way to lower break-even point: Reduce fixed costs (e.g., cheaper rent, fewer administrative staff); Reduce variable costs per unit (e.g., cheaper raw materials, more efficient production); Increase selling price per unit. [2]
Question 14:
(a) Two components of income statement: Revenue/Sales, Cost of Goods Sold, Gross Profit, Expenses (e.g., administrative, selling), Profit for the year/Net Profit. [2]
(b) Usefulness of income statement to stakeholders:
1. Shareholders/Owners: To assess profitability and potential returns (dividends); evaluate management performance.
2. Investors/Lenders: To determine creditworthiness and potential for repayment; assess future earnings potential.
3. Management: To monitor performance, identify areas for cost reduction, and make strategic decisions. [4]Question 15:
(a) Two current assets: Inventory (stock), Trade receivables (debtors), Cash and cash equivalents, Short-term investments. [2]
(b) Importance of working capital: Working capital (current assets - current liabilities) is crucial for a business's short-term liquidity and operational stability. It ensures the business can meet its day-to-day financial obligations, pay suppliers, and manage its inventory without cash flow problems, allowing smooth running of operations. [4]
Question 16:
(a) Globalisation: The increasing interconnectedness of countries through the movement of goods, services, capital, technology, and people across borders. [2]
(b) Two opportunities from globalisation:
1. Access to new markets: Businesses can sell products to a larger global customer base, increasing potential revenue and growth.
2. Access to cheaper resources: Can source raw materials, components, or labour from countries where costs are lower, reducing production expenses.
Other options: Increased economies of scale, access to new technologies/expertise, wider product range for consumers. [4]Question 17:
(a) Two advantages of wide span of control:
1. Fewer management layers: Can lead to flatter organizational structure, potentially faster decision-making.
2. Lower labour costs: Fewer managers required, reducing salary expenses.
Other options: More delegation, potentially more motivated employees. [2](b) Impact of different communication methods:
1. Verbal (e.g., meetings, phone calls): Advantages – immediate feedback, allows for clarification, personal touch. Disadvantages – no permanent record, prone to misinterpretation if not clear, can be time-consuming.
2. Written (e.g., emails, reports, memos): Advantages – permanent record, can be detailed, reaches many people. Disadvantages – no immediate feedback, can be impersonal, potential for misinterpretation if unclear.
3. Visual (e.g., charts, graphs, presentations): Advantages – conveys complex information quickly, engaging, easily understandable. Disadvantages – can be expensive to produce, may need accompanying explanation, can be misinterpreted if not well-designed. Efficiency is boosted by choosing the appropriate method for the message and audience. [6]Question 18:
(a) Two reasons for outsourcing customer service:
1. Cost reduction: Lower labour costs in other countries can significantly reduce operational expenses.
2. Access to specialist skills/expertise: Can tap into skilled workforce not available internally or locally.
Other options: Focus on core business activities, increased flexibility, 24/7 service potential. [2](b) Two potential disadvantages of outsourcing:
1. Loss of control over quality: May be difficult to monitor and maintain service standards if not directly managed.
2. Communication barriers: Time zones, language differences, and cultural nuances can lead to misunderstandings and inefficiencies.
Other options: Data security risks, negative public perception (job losses), dependency on external provider. [4]Question 19:
(a) Two ways government legislation affects business:
1. Consumer protection laws (e.g., product safety): Businesses must ensure products meet safety standards, increasing production costs/compliance checks.
2. Environmental protection laws (e.g., pollution control): Requires businesses to invest in cleaner production methods or waste disposal, increasing operational costs.
Other options: Employment laws (minimum wage, working hours), health and safety regulations, anti-monopoly laws. [2](b) Benefits of ethical operation:
1. Improved brand image/reputation: Attracts ethical consumers, potentially leading to increased sales and market share.
2. Increased employee motivation/loyalty: Employees may feel proud to work for a responsible company, leading to higher productivity and lower staff turnover.
3. Reduced risks: Less likely to face fines, legal action, or negative publicity.
Drawbacks:
1. Higher costs: Ethical sourcing, fair wages, and environmentally friendly processes can be more expensive.
2. Reduced competitiveness: If competitors do not follow similar ethical practices, they might have lower costs and sell at lower prices.
3. Difficulty in implementation: Ensuring ethical practices across the entire supply chain can be complex and challenging to monitor. [6]Question 20:
(a) Two stakeholders affected: Employees, Business owners/shareholders, Customers, Government, Local community. [2]
(b) Two potential effects on businesses:
1. Increased costs: Higher wage bill leads to increased operating costs, potentially reducing profits if prices cannot be raised. For labour-intensive businesses, this impact is greater.
2. Increased employee motivation/productivity: Workers may feel more valued, leading to increased morale, potentially higher productivity, and reduced staff turnover.
3. Increased demand: Workers have more disposable income, potentially leading to increased sales for businesses (especially those selling necessities or lower-end luxury goods).
4. Automation/Job losses: Businesses might invest in automation or reduce staff to offset increased wage costs. [6]