Principles of Business for CSEC® Examinations

Riana Balliram; Pete Budd; Edith Emmanuel; Marsha Guiness; Richell Husbands; James McCloskey; Rachael Raghoo Bitu

Series Editor: Martin Lisboa

Contributors: Paul Anderson, Wayne Dass, Margaret Latchman-Nicholson, Kamla Mungal, Carlisle Pemberton, Emma Sue Prince, Nadia Salamat-Ali

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Macmillan Education4 Crinan StreetLondon N1 9XWA division of Macmillan Publishers Limited

Companies and representatives throughout the world

ISBN 978-0-230-49467-1 AER

Text © R. Balliram; P. Budd; E. Emmanuel; M. Guiness; R. Husbands; J. McCloskey; R. Raghoo Bitu 2016Additional material by Paul Anderson; Wayne Dass; Margaret Latchman-Nicholson; Kamla Mungal; Carlisle Pemberton; Emma Sue Prince; Nadia Salamat-AliDesign and illustration © Macmillan Publishers Limited 2016

The authors have asserted their right to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988.

First published 2016

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publishers.

Designed by J & D Glover LtdOriginal design by Jennifer GloverPage make-up by J & D Glover LtdIllustrated by John Batten, J & D Glover LtdCover design by Macmillan EducationCover photograph by Shaun RambaranPicture research by Julie-Anne WilceSeries editor: Martin Lisboa

The publishers would like to thank Mr. Kevin James (Kingston College, Jamaica), Ms. Jacqueline Peters-Richardson (Antigua), Ms. Nisa Suepaul (Trinidad) and Mr. Conrad Valentine (Jamaica) for their invaluable help in reviewing this manuscript.

These materials may contain links for third party websites. We have no control over, and are not responsible for, the contents of such third party websites. Please use care when accessing them.

The author and publishers would like to thank the following for permission to reproduce their photographs:

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Paul Anderson, CEO, Trinidad and Tobago at Global Medical Response

Paul Anderson is an American expatriate healthcare executive and has practised in the Caribbean for 10 of his 25-year management career. His

portfolio includes foreign market business development in the healthcare industry, including involvement in emergency medicine enterprise. At the

time of publication, he is a Doctorate in Business Administration candidate at the University of Liverpool (UK). Mr. Anderson is an adjunct faculty member at the Arthur Lok Jack Graduate School of Business at the University of the West Indies, where he primarily lectures in business strategy.

Wayne Dass, CEO, CariCRIS

Wayne Dass is the Chief Executive Officer of Caribbean Information and Credit Rating Services Limited (CariCRIS). CariCRIS is the Caribbean’s first credit rating agency. Wayne holds BSc. and MSc. degrees in Engineering and is a Chartered Financial Analyst (CFA) charter-holder.

He has garnered over 20 years of credit market experience, technical expertise in credit risk assessment, financial risk management, investment management, and a wide knowledge of the Caribbean region. Prior to joining CariCRIS, Wayne held senior leadership positions in prominent regional financial institutions. Wayne is also a member of the board of the Trinidad & Tobago International Financial Centre and lectures part-time on Caribbean Capital Markets and Financial Institutions at the Arthur Lok Jack Graduate School of Business.

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EXPERT CONTRIBUTORS

This textbook has been written by subject specialists and practising Caribbean teachers, ensuring full and comprehensive syllabus coverage. However, understanding Principles of Business is so much more than learning for your examination – success in the exam and in the future depends on applying those concepts to real life. The following leading businesspersons have written introductions to key concepts in each unit, reflecting current business trends, concerns and practices as well as providing an accurate Caribbean context:

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Dr. Kamla Mungal, Director of the Leadership Institute, Arthur Lok Jack Graduate School of Business

Dr. Kamla Mungal is the Director of the Leadership Institute at the Arthur Lok Jack Graduate School of Business, UWI, in Trinidad and

Tobago. She also lectures in the areas of Leadership and Organisational Behaviour and Development. Dr. Mungal has participated in several

global leadership development programmes. Her specialisations include curriculum design, development and implementation, and leadership of educational organisations. Dr. Mungal won the Teacher of the Year award in 2004 for her leadership of an at-risk school and she has worked with principals across the country to develop and implement their School Improvement Plans. Dr. Mungal continues to lead her staff to attain accreditation and recognition of the business school.

Dr. Carlisle Pemberton, President of the Caribbean Agro-Economic Society (CAES)

Dr. Carlisle Pemberton recently retired as Professor of Agricultural Economics at the University of the West Indies. His teaching and research has spanned Production and Marketing, particularly with respect to the

cocoa industry and also non-market valuation of wetlands. He is the President of the Caribbean Agro-Economic Society (CAES) and served for many years as the Chairman of the Cocoa and Coffee Industry Board of Trinidad and Tobago. Professor Pemberton has received a number of awards, including the Lifetime Achievement Award of the Caribbean Agro-Economic Society, a Senior Fulbright Fellowship and a World Bank Institute Award and Scholarship (Development Marketplace).

Dr. Margaret Latchman-Nicholson, Programme Manager, Arthur Lok Jack School of Business, UWI

Dr. Margaret Latchman-Nicholson worked in the UK for a number of years as a Business Studies and Economics Teacher, and as a Teacher

Training Mentor (Secondary Schools) for the University of Hull (UK). Margaret completed her MBA and PhD at the University of Lincoln where

she became a member of the Corporate and Professional Programmes Unit, where she has facilitated organisational change and development for a variety of public and private sector organisations. She is also experienced in managing academic and professional programmes in the Caribbean and in the UK.

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Nadia Salamat-Ali, Programme Director, Arthur Lok Jack Graduate School of Business

Nadia Salamat-Ali is a lecturer and Programme Director for the International Master of Strategic Marketing Programme at the Arthur

Lok Jack Graduate School of Business. She is also its subject group leader for Marketing. Nadia has been trained in writing and teaching using

real-life cases from the Richard Ivey School of Business and has undergone specialised training in Business Etiquette and Protocol. She is also certified in teaching with the authentic business education model.

Conrad Valentine, Business Education Officer, Jamaican Ministry of Education

Mr. Conrad Valentine is currently employed at the Jamaican Ministry of Education as the Business Education Officer in the Technical &

Vocational Unit. He is a graduate of the University of Technology and holds a Bachelor’s Degree in Business. Mr. Valentine has served the

Ministry in various capacities and on various committees, and is an educator with over twenty years’ experience in the profession, who has taught at various levels of the education system.

Emma Sue Prince, Director, Unimenta

Emma Sue Prince is a qualified teacher and management development trainer, author and business consultant. Her expertise lies in soft skills, trainer training, materials design, qualification development and management development. She provides employability, soft skills and

education consultancy in emerging economies all over the world and is currently working on large-scale projects in India, Malaysia, Tanzania and Bangladesh, in partnership with the Department of International Development and the British Council. Emma Sue is director of a free membership site for teachers and practitioners who deliver soft skills and personal development. You can join for free at www.unimenta.com.

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CONTENTS

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Expert Contributors iiiHow to Use This Book ixIntroduction to the Exam xi

The Nature of Business  

Overview  121.1 Forms of Exchange and Economic Systems  141.2 Types of Business Organisation  261.3 Business Stakeholders  43

Unit 1 Revision & Exam Practice  48

The Internal Organisational Environment  

Overview  522.1 Management of Organisations  542.2 Leadership  692.3 Working Environment  752.4 Resolving Conflict at Work  842.5 Management Information Systems  89

Unit 2 Revision & Exam Practice  94

Establishing a Business  

Overview  983.1 Starting a Business  1003.2 The Entrepreneur  1043.3 Business Functions & Operations  1123.4 Financing the Business  1133.5 Conducting Market Research  1153.6 Writing a Business Plan  1173.7 Ethical and Legal Issues  120

Unit 3 Revision & Exam Practice  124

Legal Aspects of Business  

Overview  1284.1 Legal Principles and Contracts  1304.2 Business Documents  1424.3 Insurance  157

Unit 4 Revision & Exam Practice  164

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Production  

Overview  1685.1 Factors of Production  1705.2 Production and Productivity  1775.3 Small Businesses  1835.4 Business Location, Technology and Industry Links  193

Unit 5 Revision & Exam Practice  200

Marketing  

Overview  2046.1 Marketing Strategy: The Marketing Mix  2066.2 Market Research  2196.3 Market Structures  2256.4 Pricing and Consumer Behaviour  2306.5 Promotion and Sales  2376.6 Distribution Channels  2496.7 Transportation  2546.8 Consumer Protection and Intellectual Property  259

Unit 6 Revision & Exam Practice  262

Business Finance  

Overview  2667.1 Commercial Banking Sector  2687.2 Central Bank Role and Functions  2767.3 Business Finance and Personal Finance  282

Unit 7 Revision & Exam Practice  292

UNITUNIT

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UNIT 8

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The Role of Government in an Economy  

Overview  2968.1 Government and Business  2988.2 Taxation  3048.3 Government and Society  309

Unit 8 Revision & Exam Practice  318

Social Accounting and Global Trade  

Overview  3229.1 Standard of Living and Quality of Life  3249.2 National Income and Economic Growth and Development  3309.3 Trade  339

Unit 9 Revision & Exam Practice  348

Regional and Global Business Environment  

Overview  35210.1 Regional and Global Economic Institutions and Systems  35410.2 Caribbean Business Environment  360

Unit 10 Revision & Exam Practice  372

The School-Based Assessment (SBA) 376The Alternative to School-Based Assessment (SBA): Paper 03/2 390Glossary 394Index 398

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ixHOw TO USE THIS BOOk

HOW TO USE THIS BOOKMacmillan’s Principles of Business for CSEC®

Examinations Student’s Book brings students

thought-provoking and relevant learning materials

that fully engage them at every step. The material

is written in accessible language for all learning

levels, and uses a task-based approach to learning

where mini-case studies, critical thinking tasks,

comprehension questions and mini-research

projects are continuously interwoven into the core

syllabus content. The result is students who actively

participate in their own learning. Through this

process, students can retain and recall what they have

learnt far more effectively and efficiently and so will

be more likely to achieve exam success. Integral to

this approach is that students are also far more likely

to enjoy the learning experience.

How is the course organised?The structure of the course mirrors the CXC syllabus

with comprehensive coverage of all the Specific

Objectives and an extensive SBA section at the back

of the book. The key business concepts and terms

covered in the syllabus are highlighted within each

unit and are listed alphabetically in the Glossary at

the back. Each of the 10 main Units is divided into

sub-topics which group together related Specific

Objectives from the syllabus, encouraging students

to link topics and ideas. Students undertake a

thorough revision of the material at the end of every

Unit in a four-page Exam Practice & Revision section.

What is included in each unit?Each sub-unit starts with a double page spread that

orientates students to the topic. This is done in an

accessible way through personalisation which frames

the academic content in a way that is relevant to

students’ own lives – they are encouraged to think

about, discuss and apply some of the big wider issues

to their own local context.

Expert View

Each of the ten units opens with a double-page

Expert View section which is written by academic

subject specialists (see the Expert View page for

more information). This feature provides students with

credible insight into the subject area, showing how

the business theory relates to the Caribbean context.

Comprehension CheckThroughout the material, students will pause to

consider and digest what they have read by

completing comprehension questions to check their

understanding. Questions are varied in format

to keep students engaged. The questions are

designed not to simply replicate what students have

learnt but ask them to cognitively process the

information presented.

Critical ThinkingThese Critical Thinking questions are integrated into

the material. Their aim is to go beyond comprehension

by getting students to think more deeply about the

issues raised in the text. These questions are designed

to provoke discussion and to allow students to question

and challenge some of the points made. These

questions regularly encourage students to decentre:

to move them beyond their own opinion to view

issues from someone else’s perspective and to apply

learning from the Student’s Book to new contexts.

Student Research ProjectsThese short sections prompt students to deepen

their knowledge of the issues presented by doing

their own research in a structured format and then

presenting their findings back to the class. This may

involve doing research online or speaking to friends

and family which helps students ground the issues in

their own experience.

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x HOw TO USE THIS BOOk

Case Studies

The case studies cover a broad range of industry

sectors with a particular focus on the service sector:

in particular small micro-enterprises that are more

accessible to students in this age group. Cases are

written in a narrative style designed to tell the

personal stories that capture the wider business issues

and bring them to life. Through these case studies,

students are able to understand how business theory,

principles and models work in practice.

Fun with BusinessEach unit finishes with a short Fun with Business

puzzle that targets key terms and concepts presented

in the unit. These will especially benefit visual and

active learners and can be used as extension tasks.

Exam Practice & RevisionAt the end of each unit there is a four-page Exam

Practice & Revision section that fully tests students on

the material they have learnt. The revision questions

are presented in the same format as the exam to

ensure that students not only revise the content but

are also regularly familiarised with the exam itself.

The first part of this revision test mirrors the multiple

choice questions in Paper 1 of the exam. The second

part mirrors Paper 2.

Model Answer Questions The questions in Paper 2 are carefully graded model

answer questions where students complete blanks in

the texts or identify errors. This scaffolded material is

designed to be progressively more challenging as

students work through the questions. Model answers

provide successive levels of temporary support that

help students reach higher levels of comprehension and

skill acquisition. These supportive strategies are then

incrementally removed when they are no longer needed,

and responsibility for the learning process shifts to

the student. After completing the tasks, students will

be prepared to face a blank exam paper, equipped

not only with syllabus knowledge, but the skills to

interpret rubrics and to write a proper exam answer.

Digital Resources Throughout the book you will see QR codes

like this one:

These are unique Scan-Me codes which you can use to

access additional content. This includes extra case

study videos to change the pace of the lesson and

bring the topic to life, and worksheets for use at home

or in the classroom. Answers are also provided online.

To use the Scan-Me codes, you will need to download

a QR code reader onto your smartphone. But don’t

worry if you don’t have one – the hyperlinks provided

will also take you straight to your extra content, e.g.:

http://www.macmillan-caribbean.com/pages.aspx/

secondary/principles_of_business/.

The Author and Advisory TeamRiana Balliram, Pete Budd, Edith Emmanuel, Marsha

Guiness, Richell Husbands, Kevin James, Martin Lisboa,

James B McCloskey, Jacqueline Peters-Richardson,

Rachael Raghoo Bitu, Nisa Suepaul and Conrad

Valentine are experienced educators, business persons

and curriculum specialists.

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xiINTRODUCTION TO THE ExAM

INTRODUCTION TO THE EXAMThe CSEC® Principles of Business exam tests your

knowledge and understanding of the theories,

concepts, models and practices of business especially

as applied to the Caribbean context. The syllabus

aims to equip you with knowledge to pass your

examination, but also to foster a ‘sense of commitment

to the development of the community’ – you should

learn to evaluate ideas and opinions and to apply

them to the community and country around you.

You will need to demonstrate an ability to retain and

recall knowledge learnt selectively and appropriately,

interpret data and draw conclusions, identify and

analyse problems and devise solutions, develop

research skills and critical thinking skills.

The exam consists of two papers plus a School-Based

Assessment (SBA) task as follows:

Paper 1Paper 1 consists of 60 multiple choice questions. The

exam lasts 1 hour 15 minutes and provides 30% of

total marks.

Paper 2Paper 2 requires you to write extensive answers to

questions. It is divided into two parts. Part A consists

of three compulsory questions whilst Part B has a

choice of questions. Paper 2 exam lasts 2 hours and

provides 50% of total marks.

Paper 3

Paper 3/1: SBA project. Designed for school

candidates and guided by your teacher. You are

required to write a business plan on the topic of

Marketing or Finance or Production. The final project

should not exceed 1000 words. (See page 376 for

more information). Paper 3 provides 20% of total

marks.

OR

Paper 3/2: Alternative SBA project. Designed

for private candidates. You are required to answer

questions on a case study. See page 390 for more

information. The Paper 3 exam lasts 1 hour and

provides 20% of total marks.

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PB UNIT 1 | THE NATUrE of BUSINESS

UNIT SUMMARY

In this unit you will learn about the development of instruments of exchange as society evolved from the subsistence economy to using money as a medium of trade. You will learn to identify sources of finance for firms and understand the basic legal structure and responsibilities that govern how business organisations are set up. By the end of this unit you will know the documents necessary for registering the main types of business. It is important for you to be able to identify public and private sector businesses and appreciate the impact of various factors on a business as it grows and changes. Setting up a business can be difficult but coping with business growth presents another set of challenges. Unit 1 will set the stage for understanding the chapters that follow in this textbook. It explores the key notions that are important in making sense of how businesses function, regionally and internationally.

Specific Objectives

After studying this unit, you will be able to:

explain key terms and concepts related to business;

trace the development of instruments of exchange;

state reasons why an individual may want to establish a business;

describe the various forms of business organisations and arrangements;

differentiate among the different economic systems;

identify the stakeholders involved

discuss the role of the stakeholders involved in business activities;

outline the functions of a business;

describe the role of business within a community.

THE NATURE OF BUSINESS

UNIT 1

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1. How would you define the concept of ‘business’?Business may be described as all the activities concerned with the production and distribution of goods and services in order to satisfy the needs and wants of consumers. Generally a business can be defined as an organisation where goods and services are offered for exchange, usually for money. Businesses include a range of companies, from a small owner-operated business such as a family restaurant to multi-nationals such as Nestlé or Coca-Cola. Every business requires capital investment and customers so that the exchange can lead to sales and profits. Remember: there are also non-profit organisations whose objectives may not be to maximise profits but rather ethical concerns, environmental and social issues.

2. Many young people dream of owning huge companies someday. Many imagine a sole trader to be too small and, therefore, very unprofitable. How would you advise them?

If you have a good business idea and you like the idea of being your own boss then there are a number of different types of business structures that you can choose from. The legal structure of the business is quite important, as different types of businesses are subject to very different regulations and the wrong choice now could have costly consequences in the future. Take Massy Stores, a company originally begun in 1950 by Earnest Canning. The company evolved over the years to become one of the leading modern Caribbean supermarkets. There are numerous companies that enter the market as a small business such as a sole trader or partnership and that venture can grow to become a major multi-national corporation like Massy.

3. Who are the stakeholders in business? Why should they be interested in how well a business performs?

A stakeholder is any person or group of people with an interest in the success of a business. For example, the stakeholders of Caribbean Airlines (CAL) include shareholders (owners), the community, government, employees, managers, customers and other persons who may be directly affected by the way the business is run. Businesses have different rights and responsibilities towards their stakeholders. Conflicts will arise when the interests of one stakeholder group are opposite to that of another stakeholder group. You may recall when the pilots at CAL were unhappy about salary issues and took industrial action to force a decision.

13THE NATUrE of BUSINESS | UNIT 1

KEY CONCEPTS

Business All the activities concerned with the production and distribution of goods and services in order to satisfy the needs and wants of consumers.

Economy The production, distribution and consumption of goods and services within a society as a whole, including the way a country manages its resources (workers, land, natural resources or money) to produce, buy and sell those goods and services.

Stakeholder Any individual, institution, group or agency which has a vested interest in how well a business performs.

EXPERT VIEW

Dr. Margaret Latchman-Nicholson

Programme Manager,

UWI

QUESTIONS1. Define the concept of ‘business’.

2. Most Caribbean islands have a mixed economy. Briefly explain why you believe most Caribbean governments prefer this type of economic system.

3. Identify the various stakeholders who may be interested in the performance of a business. Choose ANY FOUR of those which you have listed, and briefly explain why they are interested in how well a business performs.

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