Some encouragement and useful tips

Hi everyone

I know that for many of you starting out with Cambridge IGCSE or AS studies for the first time can be a bit of a daunting experience. I shared some tips and motivation with one of your fellow-students a while ago who was experiencing some difficulty adjusting to CIE studies, so I think you all might benefit the discussion too:


I completely understand where you are coming from regards Business Studies, the workload and wanting to really understand the subject and ultimately earn a good mark. Cambridge is, in general, quite a step up for any student in terms of the amount of work to be covered, the depth and the overall standard required. There is a great deal of writing, learning and preparation required for every subject.



Speaking from experience though, it is a standard you can achieve! Yes, it takes hard work and perseverance, as well as a lot of dedication – but again, judging from my communication with many of you, I believe you are capable of making it and really performing to your best!



Some of us put a lot of pressure on ourselves; sometimes it’s really unnecessary, and other times it keeps us on our toes. What you must avoid, however, is letting your own expectations overwhelm you. This is when things become much more difficult than they seem, and your perception (a very powerful thing!) doesn’t work in your favour. To give you an example from my own CIE studies: I never enjoyed Maths (to say the least). In my final year, I remember writing the first paper and thought it went ok…I still doubted though, and thought that I would really have to try excel in the second paper if I was to earn at least a C. That second paper started pretty badly…the first two pages seemed like such a blur and so foreign to what I had learnt! Without exaggeration, I really thought I was going to either fail or receive a mark that meant I couldn’t pass with matric exemption. I though I would repeat the subject. I mentally prepared myself for this outcome.



As it turned out, I earned a B for Maths – a pleasant surprise, needless to say! Here’s my point: yes, set the bar high and expect a lot from yourself, but don’t be too hard on yourself. My problem – and something I still work on – is not getting too ahead of myself. Planning and preparation is important, just don’t let it be in control of you and don’t get ahead of yourself. Being nervous can be a good thing and work to your advantage, but it must not affect your every day life and your enjoyment of what you do.



Now to answer some questions and concerns:



– Not to worry if you experience a lack of time for revising your notes. This is not a rule that is set in stone. It’s good if you are making use of my tips and advice, but please remember to adapt them to suit your needs – no two students are completely alike. If you can only revise a certain amount of notes, that’s fine. If on occasion you can’t manage to revise your notes, that’s also fine – if you make use of our blog and/or do activities and assignments, you are still interacting with the work.



– You won’t get all the work entirely ‘in your head’ at an early stage or in ‘one go’. Rather focus on understanding what you read and being able to answer questions about it. For the moment, you need to be able to work through each unit with understanding; you will soon see how they fit together.



– If you’re following a study schedule, you will have sufficient time to revise for the exams. That is the time period you will use to get it all ‘in your head’ and ‘cement’ your understanding in preparation for the final exams. Right now, you should be exploring all this new information you are learning about.



– There will always be some areas that students don’t enjoy. You can do some extra research on your side to make things more interesting and fun. For instance, read the newspapers (even online) or check out The Economist magazine – it’s not really as difficult to follow as you might initially think. This way, you should start seeing how the theory works in reality.



– You need to consider every unit as important…I can’t say that some are more important than others, or that some sections can be left out. What you can do, though, is use the syllabus I uploaded to the blog as a checklist. This helps to make sure you are covering everything as necessary. It’s also kind of rewarding when you can ‘tick’ off a section. It means you’re one step closer!



– Again, speaking from experience, you should expect to make mistakes. Later on, you might find yourself say, “I should’ve been doing this from the start!”. Allow yourself to make those mistakes and – most importantly – to learn from them. That’s all part of life 🙂




– Don’t be scared about misunderstanding certain concepts or parts of the work. If there’s absolutely anything you have even just a bit of doubt about, contact me as soon as you can. Make a note of it to remind yourself, and then let me know.


Keep moving on and looking forward!

AS Level Assignment 2 guidelines

Hello AS students!

Please download the attached guidelines for your 2nd Business Studies assignment. These are fairly extensive and should offer a good idea of what is expected in your answers in terms of what needs to be addressed and in what depth.

NB: the uploading of these guidelines to the blog does not mean that the second assignment is due – I understand that you may have different schedules to other students. I would recommend that you print out these guidelines and keep them at hand when you begin working on the second assignment.

Here is the link to the guidelines: AS Level Assignment 2 guidelines

All the best, and if you are on holiday at the moment – enjoy the time off!

Question on limited liability

QAHi Luke,

I would just like to know how is limited liability a benefit for the business example in a private limited company or a public limited company?

As far as I understand it is a benefit for the shareholder as they can not be held responsible for any loss made the business or loose any thing more than the money they invested into the business.

How is this a benefit to the business? Is it because shareholders are more likely to buy shares in the business as they know the most they can loose is the money they invest in the business in buying shares?

Regards Carla

Hi Carla

Thanks for the question – it’s a good one, and you have just about given a good answer to it yourself.
Limited liability implies that if a company (private limited company or public limited company) fails, shareholders stand to lose only their initial investment when they purchased shares in the company. A court, for example, cannot seize the assets of the company’s shareholders.
As a result, shareholders – and potential shareholders – have much more peace of mind and security, knowing that their liability is limited. They don’t have to guess an amount that they are risking or have an open-ended question here; rather, shareholders are aware that their liability is equal to their initial investment. Also remember that limited companies have their own legal identity. In other words, they are seen as a separate entity – different to that of owners (shareholders) and management.
This is beneficial for businesses, as this kind of shareholder confidence makes companies an attractive option for investments. If shareholders have more security because of limited liability, they are much more likely to purchase shares and therefore provide finance for growth and expansion of the company. Hence we find that businesses are able to expand after ‘going public’ (listed on a stock exchange such as the JSE or the NYSE).
There is a second important consequence of limited liability: should the business fail, those who stand to lose the most are the creditors of the business. Creditors are those institutions – such as investment banks – that have loaned finance to the company. Should the business fail, these creditors may not be able to retrieve the finance loaned to the firm (note that creditors also includes suppliers that offer resources on credit).
For more on this, check out the following links:
I hope this helps to answer your question!



A note on plagiarism

Hi everyone

Please note that plagiarism, as I mentioned before, is not tolerated at this level. Plagiarism essentially involves using someone else’s words and trying to pass them off as your own. We can compare plagiarism to theft – stealing another person’s ideas.

At IGCSE and AS Level, you need to exercise the skill of gathering information (from your textbook and other resources, for example, websites), interpreting it in line with the question and providing an answer in your own words. If you have used information obtained from a website or some other source besides your textbook, please reference the source accordingly. If you would like to use the exact wording from a source, you may do so but you need to provide this in a quotation with a reference.

Committing plagiarism at higher levels of education – such as university – can carry severe consequences, including disciplinary hearings and suspension from tertiary institutions. It’s in your best interest to learn how to avoid plagiarism now, so that you are aware of it later and can provide original work.

NB: Plagiarised assignments will not be marked and awarded a final result. You will be required to re-answer the questions and then submit the assignment again.

If you have any questions about plagiarism, please feel free to contact me or comment on this post.


Assignment 2 guidelines (IGCSE)

There have been some impressive IGCSE assignment results so far for 2013! Some of you are hoping to maintain your results, and others want to improve further.

To help you tackle the second assignment, I have compiled some guidelines for each question. Please download the PDF document below and carefully read through it. After you have completed the assignment, check the guidelines again to ensure that you have met the requirements.

IGCSE Assignment 2 Guidelines

Government, business and the economy

Now since we are considering the relationship between society and business, it’s important to realise that all business activity can be either a good thing or a bad thing for society. Often, a business can be both good and bad for society at the same time. Let’s first take a look at how business can impact society positively.

Firstly, businesses provide products for people in society. Without business, the production of many goods would not take place at all, meaning that each of us would have to somehow manufacture the products we need ourselves.

Secondly, businesses employ people. This leads to job creation and income for each employee. As a result of having an income, employees can provide for themselves and their families. This also reduces unemployment and poverty in a society.

If you remember the profit motive, you will also understand that business activity promotes new product innovation and inventions in markets. This moves society forward in its development.

Society also benefits from businesses that pay tax. The tax paid to government should then be used to finance public services, like transport and hospitals.

Finally, businesses that export help to bring in foreign currency to spend on imports. We’ll review imports and exports shortly. For now, let’s say that this is an advantage for society because it means that local businesses can sell to customers overseas.


Unfortunately, not all the activities that businesses undertake are positive for everyone in society. Business activity can have some harmful impacts.

For example, the location that a business decides to choose could be in an unspoilt, natural area where the environment needs to be preserved and protected. Some businesses could damage this kind of location, which has negative consequences for society.

Some businesses don’t offer very good working conditions for their employees. This might be to cut the costs of the business, even if it means that the employees must deal with difficult, even dangerous, working conditions.

The production methods of manufacturing businesses is an important consideration too. Factories, for example, might pollute the surrounding environment with dangerous chemicals.

Not only can production methods be dangerous and harmful to society, but so can the final product itself. For example, if there were absolutely no regulations about what may or may not be produced in a country, we might find that addictive, harmful drugs could be produced. A more realistic example, perhaps, is the production of cigarettes, which are unhealthy and can badly affect even non-smokers.

Monopolies might form in states were there isn’t very much government control of business. Business owners might have the idea that by operating together and forming a monopoly, they can earn greater profit. However, this reduces customer choice and because there is no competition, prices are higher than they could be.

Some businesses use very persuasive advertising to encourage customers to purchase their goods or services. This can even be misleading advertising, ultimately causing customers to buy something that they normally would not purchase. As a result, resources are wasted.



Now that we know the possibilities for businesses to both positively and negatively impact a society, such as South Africa, we can now move on to view things from the government’s perspective. Before we look specifically at what government does to encourage the advantages of businesses and discourage the negative things about business, we first need to review the economic objectives it has. Think of these as the goals of government for the economy; in other words, what it wants to achieve.

The first common objective is to keep inflation at a low level. But what is inflation? Inflation is the increase in the average price level of goods and services over time. The cost of groceries for a family, say, 10 years ago was a lot less than it is now – that’s because of inflation. Prices have risen.
Inflation isn’t necessarily a bad thing, but rapid inflation is definitely something government wants to prevent, and here’s why:
If prices rise very quickly, There is a decline in employees’ real income – wages cannot buy as many goods as they could before. By real income, we mean the value of the products that can be purchased. Now if inflation rises faster than wages, then real income will have declined – for instance, if prices rise by 10 percent but salaries increase by just 5 percent, then real income will decline by 5 percent.
The economy becomes less competitive against other economies. Foreign goods may be more affordable, leading to unemployment and a weaker currency. Since prices rise so quickly, customers might find that products overseas are more affordable.
Finally, because prices rise so quickly, businesses can’t plan effectively for the future and will most probably not be able to expand. They might actually become smaller, meaning that some employees could no longer have their jobs. This has another effect on the employees: they will have reduced incomes and therefore lower living standards.
Government also aims to keep unemployment levels as low as possible. the level of unemployment is the number of people who are willing and able to work, but are unable to find employment. If unemployment levels are high, many people will be without work and therefore without income – this has serious consequences for an economy.
Firstly, there is a loss of overall productivity in the economy. Since so many people do not have jobs, their time and skills are not being used to produce goods or provide services. In other words, they are idle. This means the economy performs below its ability and does not reach its full potential.
Also, unemployment is costly for the government and the economy as a whole. Some states help the unemployed by providing them with grants to help them survive. The problem is that those grants could have been used for other public services if unemployment wasn’t a major problem. Basically, the economy operates more in survival mode instead of thriving.
The third objective governments normally have for the economy is to encourage a high rate of economic growth. What exactly is economic growth? When we talk of economic growth, we are actually referring to something called GDP – gross domestic product. This is the total value of the output of goods and services in an economy in one year. An economy therefore grows when the value of goods and services increases in one year.
However, there are times when economies do not grow – in fact, they can sometimes have an output that is of lower value than the previous year and even fall into recession. This affects an economy in three main ways
Firstly, reduced output of goods and services leads to higher levels of unemployment. Fewer workers are required since less is produced.
As a consequence of the first effect, there is a decline in the standard of living; goods and services are no longer affordable since people are without work or having lower wages.
A further effect is that businesses do not have much incentive to expand because the market for their products have not grown.
One way of analysing how an economy has grown or declined over a period of time is by the business cycle, also known as the trade cycle.
During the growth or expansion stage, the GDP is rising. This is the stage at which output increases and businesses generally perform well. They employ more workers and so living standards often rise.
When the economy grows to its greatest point, a peak or economic boom is reached. This is a result of excessive spending in the economy, causing prices to rise very quickly. As a result of such rapid growth, skilled workers become scarce and businesses experience a rise in costs. The economy has grown too quickly and battles to operate at such a level.
This can bring about a recession – the GDP declines. At this stage, businesses have a decline in the demand for their products and become less profitable. Unemployment could also be a problem here.
Finally, there can be a slump trough or slump. This is a severe recession where unemployment soars and prices fall greatly due to such low demand. It’s often the case that only the businesses that can afford to make losses will survive this period.
The last government objective we will consider is the balance of payments. This is the difference between an economy’s exports and imports.
 Exports are products sold to other countries; they are taken out of the country. For example, South Africa is a major exporter of diamonds and gold to other parts of the world.
Imports are products purchased from other countries; they are bought into the country. An example of imports are the electronic products South Africa imports from countries like China and Japan.
To understand the balance of payments further, let’s think about trade between South Africa, which uses the Rand as its currency, and America, which uses the U.S. Dollar.
Exporting products from South Africa to the U.S. leads to Dollars flowing into South Africa – we then have more dollars in reserve with which to purchase products from overseas.
When importing products into South Africa from the U.S., South Africa loses Dollars in our supply.
As a result, governments aim to balance exports and imports so that there is no shortage of foreign currency.
When an economy does imports more than it exports, there is a deficit in the balance of payments. Basically, the country buys in more products than it sells to other countries. There is great demand for overseas products, but we supply very few to other countries.
One problem that can arise as a result of this is that South Africa might experience a shortage of foreign currencies. This makes importing products difficult, as we will have to borrow currencies from overseas.
The second serious issue is an exchange rate depreciation. A depreciation means that the Rand becomes weak in relation to other currencies. Each Rand purchases less imports than before. We will also take a closer look at currencies and exchange rates at a later stage.
When an economy imports more than it exports, there is a deficit in the balance of payments. Basically, the country buys in more products than it sells to other countries. There is great demand for overseas products, but we supply very few to other countries.
One problem that can arise as a result of this is that South Africa might experience a shortage of foreign currencies. This makes importing products difficult, as we will have to borrow currencies from overseas.
The second serious issue is an exchange rate depreciation. A depreciation means that the Rand becomes weak in relation to other currencies. Each Rand purchases less imports than before. We will also take a closer look at currencies and exchange rates at a later stage.
Now that we have learnt about the objectives government normally has for the economy, we can also review some of the policies used to reach those goals. Think of the objectives as the ‘where’ we want to be, and the policies as the ‘how’ we get there. The policies are like a map that helps us to reach the final destination, our objectives.
The first set of policies that government uses to reach its objectives are fiscal policies. Fiscal policy deals with government changes in taxes and spending on the public sector.
Income tax is probably the most common tax that governments use to raise revenue. Essentially, it is a tax on the income that individual employees earn. The amount or percentage that an employee is taxed depends on how much he or she earns; many governments use what is called a progressive income tax, meaning that the more you earn, the greater the percentage of your salary is taxed.
A tax on businesses is called profits or corporation tax, and normally applies to the profits of companies. An increase in this type of tax could impact business in two ways.
The third type of tax is indirect tax. In South Africa and other countries, this normally takes the form of Value Added Tax (or VAT). This is a tax that is added to the prices of goods and services, resulting in higher prices.
Lastly, governments can raise revenue and impact the balance of payments through import tariffs and quotas.
The second set of economic policy set by government is the monetary policy.