Page 66 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 1 Understanding business activity

Customers
Customers have an interest in the activities of a business because they want
Profit: see Chapter 21, to be sure that the business is going to continue to exist in the future. Th is is
page 268. particularly important for goods that may need spare parts. Also, if a business
Liquidity: see Chapter 23, is earning good profits then they may reinvest some of the profit into product

page 288. development and expansion. Customers may then receive a better quality and
Non-current asset: see better variety of products.

Chapter 22, page 278. As a business expands it may benefit from economies of scale. Th ese advantages
as the level of production rises reduce the cost of making each unit of output. Th e
Economies of scale: see
Chapter 16, page 219. business might decide to reduce the price of its products which will benefi t customers.
Inventories: see Chapter 15, Government
page 205.

The government receives taxes on the profits of businesses. The higher the profi ts,
the higher the tax revenues paid to government. Tax revenues are an important
source of finance for government spending on such things as education, health,

roads and defence. Many governments pay benefits to unemployed workers. If
businesses are expanding, this will reduce the level of unemployment and so reduce
TOP TIP government spending on these benefi ts.
Do not confuse stakeholders Local community
with shareholders. Shareholders

are only one group of possible The business may offer local people employment opportunities. Other

stakeholders in a business. businesses in the area may benefit as a result because the employees will spend
some of their money locally. This will increase the revenue and profits of local

businesses such as retailers, restaurants and entertainment outlets. A business

64 may also provide financial support or other benefits to the local community. For
example, it may sponsor a local sports team or provide leisure facilities for use
by local residents.
However, the business may have a negative impact on the local community, for
example through noise or air pollution resulting from the production process, or

traffic problems as businesses receive deliveries and send out orders to customers.

Roads may also become congested during particular times of the day when workers
are starting or fi nishing work.
ACTIVITY 5.3

The statements below have been taken from the objectives of a leading clothing manufacturer.

We are committed to:

■ offering our customers quality products at the most competitive prices
■ providing shareholders with good returns on their investment
■ developing the talents of our employees through excellent training and development programmes
■ building long-term, positive relationships with our suppliers
■ protecting the environment and supporting the well-being of the community.

1 Identify the different stakeholder groups mentioned in the above statements.
2 Identify stakeholder(s) not mentioned in any of the above statements.
3 Select any three stakeholders you have identified in question 1. Explain the benefits to the company of having objectives
specifically aimed at each of the stakeholder groups you have identified.