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Paper 1 IGCSE Commerce Short Notes For Edexcel

The document outlines the key concepts of factors of production, including land, labor, capital, and enterprise, and their roles in economic activity. It discusses the interdependence of industrial sectors, the importance of division of labor and specialization, and various buying sources in commerce. Additionally, it covers different business structures such as sole traders, partnerships, limited companies, cooperatives, and franchises, along with their advantages and disadvantages.

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0% found this document useful (0 votes)
121 views23 pages

Paper 1 IGCSE Commerce Short Notes For Edexcel

The document outlines the key concepts of factors of production, including land, labor, capital, and enterprise, and their roles in economic activity. It discusses the interdependence of industrial sectors, the importance of division of labor and specialization, and various buying sources in commerce. Additionally, it covers different business structures such as sole traders, partnerships, limited companies, cooperatives, and franchises, along with their advantages and disadvantages.

Uploaded by

d7hirr
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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IGCSE Edexcel Commerce Short Notes (Paper 01)

• Capital is created through


Factors of investment and is essential for

Production increasing productivity.


4. Enterprise:
• Refers to the entrepreneurial
Definition ability to organize the other
factors of production (land, labour,
• Factors of production are the capital).
resources used in the production • Entrepreneurs take risks to start
process to create goods and businesses and innovate new
services. These are essential inputs products/services.
for economic activity.

The Four Factors of Industrial Sectors


Production
and Commerce
1. Land:
• Refers to all natural resources The Chain of Production
used in production.
• Examples: Forests, minerals, water, The chain of production refers to
oil, fertile soil. the stages through which goods
• Land is a fixed resource; it cannot and services pass before reaching
be increased or decreased the consumer. It consists of three
significantly. sectors:
2. Labour: 1. Primary Sector:
• Refers to human effort (physical • Involves extraction or harvesting of
and mental) used in production. natural resources.
• Includes skilled and unskilled • Examples: Farming, fishing, mining,
workers. forestry.
• Quality of labour depends on 2. Secondary Sector:
education, training, and health. • Involves manufacturing or
3. Capital: processing raw materials into
• Refers to man-made resources finished goods.
used in production. • Examples: Factories producing cars,
• Examples: Machinery, tools, construction companies building
factories, vehicles. homes.
IGCSE Edexcel Commerce Short Notes (Paper 01)

3. Tertiary Sector:
• Involves providing services directly
to consumers or businesses.
• Examples: Retail stores,
Division of Labour
transportation services, education,
healthcare. Definition
• Division of labour refers to splitting
Relationship Between
the production process into smaller
Sectors tasks that are performed by
different workers or groups.
• The sectors are interdependent:
1. The primary sector provides raw Specialisation
materials for the secondary sector.
2. The secondary sector processes • Specialisation occurs when
these materials into finished goods. individuals, firms, regions, or
3. The tertiary sector delivers these countries focus on producing
goods or provides related services specific goods or services in which
to consumers. they have expertise or an
advantage.
Relative Importance of
Each Sector Levels of Specialisation:

• The importance of each sector 1. Individuals:


varies by country: • Workers develop expertise in a

1. Developing countries often rely particular skill or task (e.g., a


heavily on the primary sector (e.g., surgeon specializing in heart
agriculture). surgery).
2. Industrialized countries focus more 2. Firms:
on the secondary sector (e.g., • Companies focus on producing

manufacturing). specific products/services (e.g., a


3. Advanced economies emphasize the car manufacturer specializing in
tertiary sector (e.g., finance, electric vehicles).
technology). 3. Regions:
• Areas specialize based on their
resources or climate (e.g., Silicon
Valley specializes in technology).
IGCSE Edexcel Commerce Short Notes (Paper 01)

4. Countries: 2. Limited skill development outside


• Nations specialize in industries their specialization.
where they have a comparative
advantage (e.g., Japan in Specialisation and
electronics).
Commerce
Impact of Division of • Specialisation increases productivity
Labour but creates a need for commerce
as specialized producers must
trade with others for
On Firms:
goods/services they do not produce
• Advantages: themselves.
1. Increased efficiency as workers
become skilled at specific tasks. Interdependence of
2. Faster production due to
Countries
specialization.
3. Lower costs as processes are
• Countries depend on each other
streamlined.
due to specialization and global
• Disadvantages:
trade:
1. Over-dependence on specialized
• Example: A country exporting
workers can cause disruptions if
agricultural products may import
they leave.
machinery from another country
2. Limited flexibility if market
specializing in industrial goods.
demands change.
• This interdependence fosters
international cooperation but also
On Workers: creates vulnerabilities if trade is
disrupted.
• Advantages:
1. Workers develop expertise in their
tasks.
2. Higher productivity can lead to
better wages.
• Disadvantages:
1. Repetitive tasks may lead to
boredom or dissatisfaction.
IGCSE Edexcel Commerce Short Notes (Paper 01)

• Complexities with customs and


Sources of Buying tariffs.

in Commerce • Communication challenges due to


language barriers.

Types of Buying 4. Direct Buying:


• Purchasing directly from the
Sources
supplier.
1. Home Buying:
• Buying from suppliers within the • Advantages:
same country. • Lower costs by eliminating
intermediaries.
• Advantages: • Better control over quality and
• Faster delivery times. delivery.
• Easier communication and
negotiation.
• Lower transportation costs. • Disadvantages:
• Requires more time and resources
• Disadvantages: for negotiation and management.
• Limited access to specialized
products. 5. Indirect Buying:
• Higher costs compared to • Buying through intermediaries like

international suppliers. wholesalers or distributors.

2. International Buying: • Advantages:


• Buying from suppliers in other • Convenience and efficiency.
countries. • Access to a broader range of
3. products.
• Advantages:
• Access to specialized products or • Disadvantages:
lower costs. • Higher costs due to intermediary
• Diversification of supply chain. fees.
• Less control over product quality.
• Disadvantages:
• Higher transportation costs.
IGCSE Edexcel Commerce Short Notes (Paper 01)

6. Mail Order:
• Buying products through mail
Costs Associated
catalogs or online platforms.
with Buying
• Advantages:
• Convenience for customers. Types of Costs
• Wide product range available.
1. Transport Costs:
• Disadvantages: • Costs associated with moving goods

• Higher return rates due to product from suppliers to buyers.


mismatches. • Includes fuel, vehicle maintenance,

• Dependence on postal services for and logistics services.


delivery. 2. Transaction Costs:
• Costs related to exchanging
currencies, taxes, and tariffs.
Reasons Firms Might
• Includes fees for currency
Outsource Production conversion and compliance with
international trade regulations.
• Cost Savings: Lower labor and 3. Administration Costs:
operational costs. • Costs related to managing the
• Specialization: Access to specialized purchasing process.
skills or equipment. • Includes salaries of purchasing
• Flexibility: Ability to quickly adapt staff, office expenses, and
to changes in demand. software costs.
• Risk Management: Reduces the risk Environmental Costs:
of investing in new equipment or • Costs associated with the
technology. environmental impact of
purchasing decisions.
• Includes costs of sustainable
packaging, carbon offsetting, and
waste management.
Research Costs:
• Costs associated with researching
suppliers and products.
• Includes travel expenses for
visiting suppliers, market research
reports, and product testing.
IGCSE Edexcel Commerce Short Notes (Paper 01)

Staffing Costs: 3. Distribution Costs:


• Costs related to hiring and training • Costs related to delivering products
purchasing staff. to customers.
• Includes salaries, benefits, and • Includes shipping fees, packaging
training programs for purchasing materials, and logistics services.
personnel. • Applies to both e-commerce and
m-commerce platforms.

Costs Associated
Types of
with Selling
Commercial
Types of Costs Enterprise
1. Sales Staff Costs:
• Salaries and benefits for sales
Private and Public
personnel. Enterprises
• Includes commissions and bonuses.
2. Payment Processes Costs: 1. Private Enterprises:
• Costs associated with processing • Owned by individuals or private
payments. entities.
• Includes transaction fees for credit • Examples: Sole traders,
card processing and online partnerships, private limited
payment platforms. companies.
1. Stolen Inventory Costs: • Motivated by profit.
• Costs associated with theft or loss 2. Public Enterprises:
of inventory. • Owned by the government or public
• Includes replacement costs and entities.
potential loss of sales. • Examples: State-owned
2. Damaged Inventory Costs: corporations, public limited
• Costs associated with inventory companies.
damage during storage or shipping. • Often serve public interests or
• Includes replacement costs and strategic sectors.
potential loss of sales.
IGCSE Edexcel Commerce Short Notes (Paper 01)

2. Limited Growth Potential:


Sole Trader • Scaling the business can be
challenging without converting to
Definition another structure.
3. Credibility Issues:
• A sole trader is an individual who • May be perceived as less
owns and operates a business professional or stable compared to
alone. larger companies.
• There is no legal distinction
between the owner and the Implications
business.
• Business Formation: Simple and
Advantages quick to establish.
• Documents Required: Minimal
1. Simplicity and Autonomy: documentation; must register for
• Easy to set up and manage. Self Assessment with HMRC.
• Complete control over business • Raising Capital: Limited access to
decisions. external capital.
2. Flexibility: • Ownership and Control: Complete
• Can quickly adapt to changes in control by the owner.
the market. • Distribution of Profit: All profits go
1. Cost-Efficiency: to the owner.
• Lower setup and maintenance costs • Liability: Unlimited personal liability
compared to other structures. for business debts.
2. Tax Efficiency: • Suitability: Suitable for small,
• Simplified tax process; profits are simple businesses where the owner
taxed as personal income. wants full control.

Disadvantages
1. Unlimited Liability:
• The owner is personally
responsible for all business debts
and liabilities.
1. Limited Access to Capital:
• Difficulty in securing large loans or
investments.
IGCSE Edexcel Commerce Short Notes (Paper 01)

Partnership Implications
• Business Formation: Requires a
Definition partnership agreement.
• Documents Required: Partnership
• A partnership is a business owned
agreement; may need to register
and operated by two or more
with relevant authorities.
individuals or entities.
• Raising Capital: Easier than sole
traders but still limited compared
Advantages to corporations.
• Ownership and Control: Shared
1. Shared Risk and Expertise: among partners.
• Partners can share responsibilities • Distribution of Profit: Profits are
and bring different skills to the shared according to the
business. partnership agreement.
2. Easier Access to Capital: • Liability: General partners have
• Compared to sole traders, unlimited liability; limited partners
partnerships may find it easier to have liability limited to their
secure loans or investments. investment.
3. Flexibility: • Suitability: Suitable for businesses
• Partners can make decisions that benefit from shared expertise
collectively. and risk.

Disadvantages
1. Unlimited Liability:
• General partners have unlimited
personal liability for business
debts.
2. Potential for Conflicts:
• Disagreements among partners can
hinder decision-making.
3. Limited Growth Potential:
• Similar to sole traders, scaling can
be challenging without converting
to another structure.
IGCSE Edexcel Commerce Short Notes (Paper 01)

3. Less Control for Individual


Limited Company Shareholders:

(Private and Public) • Decision-making is distributed


among shareholders.

Definition
A limited company is a separate

Implications
legal entity from its owners
(shareholders).
• Business Formation: Requires
• Private Limited Company (Ltd.):
registration with Companies House.
Shares are not publicly traded.
• Documents Required: Articles of
• Public Limited Company (PLC):
Association, Memorandum of
Shares are publicly traded on
Association.
stock exchanges.
• Raising Capital: Can issue shares to
raise capital.
Advantages • Ownership and Control: Ownership
through shares; control can be
1. Limited Liability: distributed among shareholders.
• Shareholders have liability limited • Distribution of Profit: Profits are
to their investment in shares. distributed as dividends to
2. Access to Capital: shareholders.
• Can raise capital through share • Liability: Shareholders have limited
issuance. liability.
3. Credibility and Stability: • Suitability: Suitable for larger
• Often perceived as more businesses seeking to raise capital
professional and stable. and protect owners from personal
liability.
Disadvantages
1. Complex Setup:
• Requires registration with
Companies House and more formal
documentation.
2. Higher Regulatory Requirements:
• More compliance costs and
administrative tasks.
IGCSE Edexcel Commerce Short Notes (Paper 01)

• Documents Required: Cooperative


Cooperative agreement; may need to register
with relevant authorities.
Definition • Raising Capital: Limited access to
external capital.
• A cooperative is a business owned • Ownership and Control: Owned and
and controlled by its members, who controlled by members.
share resources and benefits. • Distribution of Profit: Profits are
distributed among members based
Advantages on their participation

1. Shared Risk and Benefits:


• Members share the risks and
Franchise
rewards of the business.
2. Democratic Decision-Making:
• Decisions are made collectively by
Definition
members.
3. Community Focus: • A franchise is a business
• Often focused on serving the
arrangement where a company
community or members' needs. (the franchisor) grants another
party (the franchisee) the right to
use its business model, brand, and
Disadvantages products in exchange for a fee
and ongoing royalties.
1. Slow Decision-Making:
• Collective decision-making can be
time-consuming. Role of the Franchisor
2. Limited Access to External Capital:
1. Brand Management:
• May face challenges in securing
• Maintains the brand image and
external funding.
standards.
2. Training and Support:
Implications • Provides training and ongoing
support to franchisees.
• Business Formation: Requires a
3. Marketing:
cooperative agreement or charter.
• Often handles national marketing
efforts.
IGCSE Edexcel Commerce Short Notes (Paper 01)

Privatization Public Sector


Characteristics
Definition
1. Ownership: Government-owned.
• Privatization is the process of 2. Control: Controlled by government
transferring ownership of a policies.
business or asset from the public 3. Objectives: Focus on public welfare
sector to the private sector. and service provision

Reasons for Private Sector


Privatization Characteristics
1. Efficiency: 1. Ownership: Owned by individuals or
• Private companies often operate shareholders.
more efficiently. 2. Control: Controlled by private
2. Increased Investment: decision-making.
• Attracts private investment to 3. Objectives: Primarily aims to
improve services. maximize profits
3. Reduced Government Burden:
• Shifts financial responsibilities
from the government to private
entities.

Examples
• Telecommunications, utilities,
transportation services.

Characteristics of Public Functions of


and Private Sectors Retailers
IGCSE Edexcel Commerce Short Notes (Paper 01)

Temporary or permanent stalls


Key Functions •
selling a variety of goods.
2. Independent Retailers:
1. Buying:
• Small, privately owned businesses.
• Purchasing goods in bulk from
3. Specialty Shops:
manufacturers or wholesalers.
• Stores focusing on specific
2. Storing:
products or niches.
• Maintaining inventory to ensure
4. Department Stores:
products are available for sale.
• Large stores offering a wide range
3. Selling:
of products under one roof.
• Selling products to final consumers.
5. Multiples (Chain Stores):
4. Providing Credit Facilities:
• Multiple locations of the same retail
• Offering payment options like
brand.
credit cards or installment plans.
6. Supermarkets:
5. Introducing New Products:
• Stores specializing in food and
• Promoting new items to attract
household items.
customers.
7. Hypermarkets:
6. Advertising and Window Displays:
• Large stores combining
• Attracting customers through visual
supermarket and department store
displays and promotional activities.
features.
7. After-Sales Service:
8. Electronic Commerce
• Providing support and maintenance
• Online retailers selling products
for purchased products.
through digital platforms.

Services Provided
Key Factors
• Retailers act as intermediaries
• Availability of Labour:
between suppliers and consumers,
offering a range of services that • Closeness to Markets:.
enhance the shopping experience, • Transport Links:
including product information, • Availability of Power:
customer assistance, and logistics • Reliable energy supply for

management operations.
2. Availability of Raw Materials:
• Relevant for retailers handling
Types
perishable goods.
3. Competition:
1. Street Markets:
IGCSE Edexcel Commerce Short Notes (Paper 01)

• Presence of other retailers in the • Incentives to encourage repeat


area. business.
4. Availability of Suppliers:
• Access to reliable suppliers for Modern Retail Trends
inventory.
5. Communication: 1. Omnichannel Retailing:
• Effective communication networks • Integrating online and offline
for business operations. shopping experiences.
2. Self-Scan Checkouts:
Retail Techniques • Allowing customers to scan and pay
for products without assistance.
1. Branding: 3. Click and Collect:
• Creating a distinct identity for • Allowing customers to order online
products or services. and pick up in-store.
2. Own Labels: 4. Mobile Retailing (M-commerce):
• Products branded by the retailer • Selling products through mobile
rather than the manufacturer. devices.
3. Logos and Packaging:
• Visual elements that reinforce Reasons for Survival For
brand identity.
4. Self-Service: Small Retailers
• Allowing customers to select
products without assistance. 1. Personal Service:
• Offering personalized attention and
5. After-Sales Service:
• Providing support and maintenance
advice.
for purchased products. 2. Flexible Opening Hours:
• Adapting to local needs and
6. Barcoding and EPOS:
• Using technology to streamline
customer preferences.
inventory management and 3. Additional Services:
checkout processes. • Providing services beyond basic

7. Loss Leaders: retailing, such as product


• Selling products at a loss to attract
customization.
customers.
8. Seasonal and Special Offers: Changes in Retail
• Promotions tied to specific events
or seasons. 1. Digitalization:
9. Loyalty Cards and Programmes:
IGCSE Edexcel Commerce Short Notes (Paper 01)

• Shift towards online shopping and • Environmental Awareness: Growing


digital platforms. awareness of sustainable
2. Globalization: consumption practices.
• Increased competition from
international retailers.
3. Sustainability: Wholesalers
• Growing demand for eco-friendly
products and practices.
Definition and Role
Impact on Businesses • Wholesalers are intermediaries
between manufacturers and
• Adaptation to New Technologies: retailers, playing a crucial role in
Retailers must invest in digital the supply chain by buying goods
infrastructure. in bulk from manufacturers and
• Competition and Market Share: selling them in smaller quantities to
Smaller retailers face challenges retailers or other businesses
competing with larger chains. • They facilitate the flow of goods,
• Sustainability Initiatives: Businesses ensuring that products are
must adopt environmentally available when and where needed,
friendly practices to remain and help manufacturers reach a
competitive. broader market

Key Functions
Impact on Individuals
1. Breaking Bulk:
• Job Market Changes: Shifts in • Purchasing goods in large
employment opportunities due to quantities and selling them in
automation and digitalization. smaller quantities to retailers.
• Consumer Choices: Increased access 2. Risk Bearing:
to diverse products and services
through online platforms.
IGCSE Edexcel Commerce Short Notes (Paper 01)

• Assuming the risk of holding


Changes in Wholesaling
inventory and managing supply
and demand.
1. Digitalization and E-commerce:
3. Advice to Retailers:
• Increased competition from online
• Providing product information and
retailers and direct-to-consumer
market insights to help retailers
sales models1
make informed purchasing
2. Globalization:
decisions.
• Expanded market reach but also
4. Offering Trade Credit:
increased competition from
• Extending credit to retailers to
international wholesalers.
facilitate purchases.
3. Automation and Technology:
5. Freeing Storage Space for Smaller
• Improved operational efficiency
Stores:
through automation tools,
• Allowing small retailers to maintain
enhancing inventory management
minimal inventory by providing
and communication with suppliers
just-in-time delivery.
and clients4.
6. Preparing Goods for Resale:
• Packaging, labeling, and preparing
products for retail sale.
Impact on
7. Delivering to Retailers: Manufacturers
• Managing logistics to ensure timely
delivery of products to retailers. • Increased Competition:
Manufacturers face more
Types competition in reaching retailers
due to digital platforms.
1. General Wholesalers: • Direct Sales Opportunities:
• Handle a wide range of products Manufacturers can now sell directly
from various manufacturers. to consumers, bypassing traditional
2. Cash-and-Carry Wholesalers: wholesalers.
• Require retailers to pay cash
upfront and collect goods
themselves.
3. Voluntary Chains: Impact on Retailers
• Independent retailers form a group
to purchase goods collectively from • Access to Broader Product Range:
wholesalers, often benefiting from Wholesalers provide a diverse
economies of scale. range of products, but retailers
IGCSE Edexcel Commerce Short Notes (Paper 01)

must adapt to changing market physical constraints of traditional


dynamics. stores45.
• Dependence on Wholesalers: 4. Delivery to Customer:
Retailers rely on wholesalers for • Products are shipped directly to
inventory management and customers, often with various
logistics. delivery options.
5. Return Options:
Impact on Consumers • E-commerce platforms typically
provide return policies for
• Increased Product Availability: customer convenience and
Consumers have access to a wider satisfaction.
range of products due to efficient
distribution networks. Impact on Business and
• Price Competition: Consumers
benefit from competitive pricing
Society
due to increased competition among
1. Change in Supply:
wholesalers and retailers.
• E-commerce has led to changes in
supply chains, with more emphasis
on direct-to-consumer delivery.
E-Commerce 2. Supplying Direct from a Warehouse:
• Many e-commerce businesses

Key Characteristics operate by shipping products


directly from warehouses,
1. Use of Websites: bypassing traditional retail
• E-commerce relies on websites or
intermediaries.
mobile apps for transactions. 3. Communication through Online
2. Bricks and Clicks: Orders:
• Some e-commerce businesses • Orders are placed and managed

integrate physical stores (bricks) entirely online, reducing the need


with online platforms (clicks) to for physical interactions.
offer a seamless shopping 4. More National and International
experience. Customers:
3. Availability of a Wide Range of • E-commerce expands a business's

Goods: reach beyond local markets to


• E-commerce platforms can offer a national and international
vast array of products without the customers45.
IGCSE Edexcel Commerce Short Notes (Paper 01)

5. Environmental Impacts: 1. Access to Markets:


• Increased packaging and shipping • Expands market reach for
can lead to higher carbon businesses, allowing them to sell
emissions, but e-commerce also products internationally.
offers opportunities for more 2. Utilization of Resources:
efficient logistics and reduced • Countries can export surplus
travel emissions. resources and import goods that
are not produced locally.
Key Location Factors 3. Economic Growth:
• Enhances economic activity by

1. Importance of Transport Links: increasing GDP through exports


• Access to efficient transportation and imports, leading to job
networks is crucial for timely creation.
delivery of products. 4. Consumer Choice:
2. No Need for Footfall: • Provides consumers with a wider

• Unlike traditional retail, e- variety of goods and services that


commerce businesses do not may not be available domestically.
require high foot traffic locations. 5. Risk Sharing:
3. Need for Space for Increased • Helps countries mitigate risks

Inventory: associated with local production


• E-commerce businesses often disruptions (e.g., natural disasters).
require large warehouse spaces to 6. Strengthened International Relations:
manage inventory and fulfill orders • Promotes diplomatic ties and

efficiently. cooperation between trading


4. Availability of Specialist Labour: nations.
• Access to skilled labor in areas like
logistics, IT, and customer service is Key Concepts
essential for e-commerce
operations. 1. Imports and Exports:
• Imports: Goods and services
purchased from other countries.
6. • Exports: Goods and services sold to
other countries.
2. Visible and Invisible Trade:
International Trade • Visible Trade: Trade of tangible
goods (e.g., machinery, food).
Key Benefits
IGCSE Edexcel Commerce Short Notes (Paper 01)

• Invisible Trade: Trade of intangible • Increases trade efficiency among


services (e.g., tourism, financial member states.
services). • Can lead to economic growth but
may disadvantage non-member
countries.
Balance of Trade: The difference
between the value of a country's Challenges
exports and imports.
• Balance of Payments: A 1. Language Barriers:
comprehensive record of all • Communication issues can
economic transactions between complicate negotiations and
residents of a country and the rest transactions.
of the world. 2. Distance:
• Geographic distance can increase

Trading Blocs shipping times and costs.


3. Methods of Payment:
• Different payment practices can
Key Features create risks for exporters.
4. Differing Consumer Wants:
1. Removal of Tariffs: • Understanding local preferences is
• Trading blocs eliminate tariffs
crucial but can be challenging.
among member countries to 5. Documentation:
promote free trade. • Exporters must navigate complex
2. Common External Tariff: paperwork for customs and
• Member countries impose a
compliance.
uniform tariff on imports from 6. Currency Exchange:
non-member countries. • Fluctuations in exchange rates can
3. Free Movement of Labour, Capital, impact profitability.
and Goods:
• Facilitates easier movement across
borders for workers, investments, Multinationals
and products.
Definition
Impact on Countries and
• Multinational Corporations (MNCs)
Businesses operate in multiple countries, often
IGCSE Edexcel Commerce Short Notes (Paper 01)

with a significant presence in each


market.
Insurance

Reasons for Existence Key Purposes

• Access to new markets, resources, 1. Risk Reduction: Mitigates financial


labor, and cost efficiencies. losses from unforeseen events.
2. Compensation: Provides financial
reimbursement for losses incurred.
Advantages
3. Financial Protection: Safeguards
1. Economies of Scale: Reduces costs individuals and businesses against
through large-scale production. significant financial burdens.
2. Market Diversification: Reduces 4. Business Confidence: Encourages
dependence on a single market. investment by reducing uncertainty.
3. Access to Talent: Leverages global 5. Investment Facilitation: Allows for
talent pools. riskier ventures by providing a
safety net.

Disadvantages
1. Cultural Challenges: Navigating
different cultural norms can be
complex. Essential Principles
2. Regulatory Compliance: Must comply
1. Indemnity: Ensures that insured
with various laws across countries.
parties are restored to their
3. Political Risks: Exposure to political
financial position before the loss
instability in host countries.
occurred.
2. Contribution: If multiple policies
Impact on Host cover the same risk, each insurer
Countries contributes to the claim.
3. Subrogation: Allows insurers to
• Can lead to job creation but may pursue third parties responsible
also result in local businesses for a loss after compensating the
being outcompeted or insured.
environmental concerns arising 4. Insurable Interest: The insured
from operations. must have a legitimate interest in
IGCSE Edexcel Commerce Short Notes (Paper 01)

the subject matter of the 1. Proposal Form: Application for


insurance. insurance coverage.
5. Utmost Good Faith (Uberrimae Fidei): 2. Cover Note: Temporary proof of
Both parties must act honestly insurance until the policy is issued.
without concealing information. 3. Policy: The formal contract outlining
coverage terms.
Statistical Basis
Endorsements and
• Involves pooling risks, forecasting
losses, fixing premiums based on
Clauses
risk assessment, and compensating
• Endorsements modify coverage;
for losses incurred.
clauses specify conditions related
to the insured property or life
Roles in Insurance covered.

• Actuaries assess risk and set


premiums; assessors evaluate
Roles in Insurance
claims for validity.
• Brokers/agents facilitate sales;
underwriters assess risk and
Types of Risks Covered determine policy terms.

1. Premises
2. Theft
2.
3. Motor
4. Marine Claim Process
5. Fire
6. Consequential Loss • Involves submitting a claim form
7. Employers’ Liability detailing the loss or damage
8. Product Liability incurred along with supporting
9. Fidelity Guarantee documentation as required by the
10. Credit Insurance insurer.
11. Plate Glass

Main Documents
IGCSE Edexcel Commerce Short Notes (Paper 01)

• Addressing complaints by offering


Consumer refunds or replacements;

Protection improving quality control processes


to prevent future issues.
legislation
Trade Protection
Reasons for Consumer
Protection Definition

• Ensures fair trading practices, • Trade protection refers to


promotes consumer rights, government policies that restrict
enhances product safety, and international trade to protect
builds trust in markets. domestic industries from foreign
competition.

Legislation
Types of Trade
• Various laws exist globally to Protection
protect consumers from fraud,
unsafe products, and unfair 1. Tariffs:
business practices (e.g., Consumer • Taxes imposed on imported goods,
Rights Act). making them more expensive than
domestic products.
• Purpose: To raise revenue for the
government and protect local
Buyer Actions against industries by discouraging imports.
2. Quotas:
faulty goods or poor
• Limits on the quantity of specific
service goods that can be imported over a
set period.
• Making complaints about faulty • Purpose: To protect domestic
goods or poor service through producers by reducing foreign
customer service channels or competition and increasing prices
regulatory bodies. for consumers.
3. Trade Restrictions:
Seller Actions
IGCSE Edexcel Commerce Short Notes (Paper 01)

• Other measures such as import • Platforms where currencies are


licensing, embargoes, and traded, determining exchange rates
standards that limit imports. based on supply and demand.
• Purpose: To control the quality of 2. Calculation of Exchange Rates:
imports and protect national • Exchange rates can be expressed
security. in various ways, including direct
quotes (domestic currency per unit
Impact of Tariffs, of foreign currency) or indirect
quotes (foreign currency per unit
Quotas, and Trade of domestic currency).
Restrictions 3. Exchange Rate Changes:
• Fluctuations in exchange rates can

• Higher Prices: Consumers often occur due to economic indicators,


face increased prices for imported interest rates, inflation, and
goods due to tariffs and quotas. political stability.
• Reduced Supply: Quotas limit the 4. Impact of Appreciation and
availability of foreign goods, Depreciation:
leading to shortages. • Appreciation: When a currency

• Domestic Industry Protection: These increases in value relative to


measures can benefit local others; makes exports more
producers by reducing competition. expensive but imports cheaper.
• Consumer Choice: Trade restrictions • Depreciation: When a currency

can limit the variety of products decreases in value; makes exports


available to consumers. cheaper but imports more
• Potential for Smuggling: High tariffs expensive.
and quotas may encourage illegal
trade practices as businesses seek Bad debts
to bypass restrictions.

Definition
Exchange Rates
• Bad debts refer to amounts owed
Key Concepts by customers that are unlikely to
be collected.
1. Foreign Exchange Markets:
Impact of Bad Debts
IGCSE Edexcel Commerce Short Notes (Paper 01)

1. On Businesses:
• Financial Losses: Reduces cash flow
and profitability.
• Increased Costs: May require
additional resources for debt
collection efforts.
• Creditworthiness: High levels of bad
debts can affect a company's
ability to secure financing.
2. On Individuals:
• Credit Score Impact: Accumulation
of bad debts can lower credit
ratings.
• Financial Stress: Individuals may
face difficulties in meeting other
financial obligations.

Ways to Reduce Bad


Debts
• Conduct thorough credit checks
before extending credit.
• Implement strict payment terms
and conditions.
• Offer discounts for early payments
to encourage timely settlement.
• Regularly review accounts
receivable to identify potential bad
debts early.

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