Cambridge IGCSE & O Level Business Studies - Key Definitions
Chapter 1: Business Activity
Business: The activity of making, buying, or selling goods or providing services in
exchange for money.
Opportunity Cost: The next best alternative forgone when making a decision.
Added Value: The difference between the selling price of a product and the cost of
bought-in materials and components.
Chapter 2: Classification of Businesses
Primary Sector: Industries that extract natural resources, e.g., farming, fishing, and
mining.
Secondary Sector: Industries that manufacture goods using raw materials, e.g.,
factories and construction.
Tertiary Sector: Industries that provide services, e.g., retail, banking, and transport.
Chapter 3: Enterprise, Business Growth and Size
Entrepreneur: An individual who organizes, operates, and takes the risks of a
business venture.
Business Plan: A document containing the objectives, financial details, and market
strategy of a business.
Chapter 4: Types of Business Organisation
Sole Trader: A business owned and operated by one person.
Partnership: A business owned by two or more people who share profits and
responsibilities.
Private Limited Company: A business owned by shareholders with limited liability but
cannot sell shares to the public.
Chapter 5: Business Objectives and Stakeholder Objectives
Profit Maximisation: The goal of making as much profit as possible.
Stakeholder: An individual or group affected by business activities, such as
employees, customers, and suppliers.
Chapter 6: Motivating Employees
Maslow's Hierarchy of Needs: A theory that explains motivation through a pyramid of
human needs, from basic to self-actualization.
Financial Incentives: Payments such as wages, salaries, and bonuses used to
motivate employees.
Chapter 7: Organisation and Management
Hierarchy: A system in a business where employees are ranked according to their
level of authority.
Span of Control: The number of subordinates a manager directly controls.
Chapter 8: Recruitment, Selection and Training of Employees
Job Description: A document that outlines the duties, responsibilities, and working
conditions of a job role.
Training: The process of improving employees' skills and knowledge for their job.
Chapter 9: Internal and External Communication
Internal Communication: The exchange of information within an organization.
External Communication: Communication between the business and external
stakeholders such as customers and suppliers.
Chapter 10: Marketing, Competition and the Customer
Market Segment: A group of consumers with similar characteristics and buying
habits.
Marketing Mix: The four elements (Product, Price, Place, Promotion) used to market
a product successfully.
Chapter 11: Market Research
Primary Research: First-hand data collected directly from potential customers, e.g.,
surveys and interviews.
Secondary Research: Existing data collected by others, e.g., government reports,
market analysis.
Chapter 12: The Marketing Mix: Product
Branding: The process of creating a unique name and image for a product in
consumers' minds.
Product Life Cycle: The stages a product goes through from introduction to decline in
the market.
Chapter 13: The Marketing Mix: Price
Cost-plus Pricing: Adding a percentage markup to the cost of production to determine
the selling price.
Penetration Pricing: Setting a low initial price to attract customers before increasing it
later.
Chapter 14: The Marketing Mix: Place
Distribution Channel: The path a product takes from manufacturer to consumer, e.g.,
wholesaler, retailer.
E-commerce: Buying and selling goods and services over the internet.
Chapter 15: The Marketing Mix: Promotion
Advertising: The process of promoting products through paid media, such as TV or
social media.
Sales Promotion: Short-term incentives to encourage purchases, e.g., discounts,
coupons.
Chapter 16: Technology and the Marketing Mix
Digital Marketing: The use of online platforms such as social media and email to
promote products.
Big Data: Large volumes of structured and unstructured data used for market analysis.
Chapter 17: Marketing Strategy
Mass Marketing: Targeting a large audience with a single product or strategy.
Niche Marketing: Targeting a specific segment of the market with specialized
products.
Chapter 18: Production of Goods and Services
Job Production: Producing one item at a time, tailored to customer requirements.
Batch Production: Producing a set number of identical products before switching
production.
Chapter 19: Costs, Scale of Production and Break-even Analysis
Fixed Costs: Costs that remain constant regardless of production levels.
Break-even Point: The level of sales where total revenue equals total costs.
Chapter 20: Achieving Quality Production
Total Quality Management (TQM): A continuous process of improving product
quality in a business.
Quality Control: Checking goods for defects at the end of production.
Chapter 21: Location Decisions
Infrastructure: The basic facilities and services needed for business operations, such
as transport and power.
Labour Supply: The availability of workers with the necessary skills in a business
location.
Chapter 22: Business Finance: Needs and Sources
Capital Expenditure: Spending on long-term assets such as buildings and machinery.
Revenue Expenditure: Spending on day-to-day operations, such as wages and rent.
Chapter 23: Cash Flow Forecasting and Working Capital
Cash Flow: The movement of money in and out of a business.
Liquidity: A business's ability to pay short-term debts.
Chapter 24: Income Statements
Revenue: The total income generated from sales before any expenses are deducted.
Net Profit: The final profit after all expenses, taxes, and costs have been deducted
from revenue.
Chapter 25: Statement of Financial Position
Assets: Resources owned by a business that have economic value, e.g., cash,
equipment.
Liabilities: Debts and obligations that a business owes, such as loans and accounts
payable.
Chapter 26: Analysis of Accounts
Profitability Ratio: A financial metric used to assess a company's ability to generate
profit.
Liquidity Ratio: A measure of a business’s ability to pay short-term liabilities.
Chapter 27: Economic Issues
Inflation: A general increase in prices and fall in the purchasing value of money.
Unemployment: The percentage of people actively seeking work but unable to find
employment.
Chapter 28: Environmental and Ethical Issues
Sustainability: Meeting present needs without compromising future generations.
Corporate Social Responsibility (CSR): A company's efforts to positively impact
society and the environment.
Chapter 29: Business and the International Economy
Exchange Rate: The value of one currency compared to another.
Globalisation: The increasing integration and interdependence of world economies.
