The Importance of Good Communication (Edexcel IGCSE Business)

Revision Note

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

Benefits of Effective Communication

  • Effective communication means that the information or message being sent is received, understood and acted upon in the way intended

  • Effective communication should be

    • Clear and unambiguous

    • Appropriate to the context and to the sender

    • Sent to the correct receiver in an accessible format

    • Timely and contain only the required amount of detail

  • Effective communication is important to any business as it affects many key stakeholders including employees, managers, suppliers and customers

  • Overall, effective communication helps a business meet it's objectives by making it easier to control and coordinate business activity 

    • As poor communication leads to higher costs, demotivated workers and a lack of cooperation, it is essential businesses  establish effective communication channels

 

Diagram: The Importance of Good Communication

the-importance-of-good-communication--edexcel-igcse-business-rn

Effective communication prevents problems from arising and builds a positive culture

Explanation of the Importance of Effective Communication

Factor

Explanation

Real World Example

Increased worker motivation

  • May lead to improved employee involvement in the decision-making process, which motivates workers

  • Allows for effective feedback from employees to each other 

  • The UK-based bus company Stagecoach has implemented an app called Blink, which uses instant messaging and a reward and recognition system to improve communication

    • As a result, there was a 32% increase in employee satisfaction and a 26% reduction in staff turnover

Improves efficiency

  • Makes successful decision-making easier as decisions are based on more complete and accurate information

  • Employees will be more productive when they fully understand tasks and processes

  • TED, famous for their signature talks, ensures all meetings take 18 minutes or less

    • Research shows that long meetings are counterproductive and workers pay less attention, reducing productivity

Encourages innovation

  • Open communication encourages workers to ask for help and suggest improvements

    • This could lead to greater creativity and innovation within the business

  • At the US company 3M, workers spend 15% of their day in collaboration with colleagues allowing for open communication and idea generation

Builds a positive company culture

  • Supports everyone involved in a business to understand their role and know what is expected of them

  • Encourages teamwork and co-operation between employees

  • Zappos updates workers as soon as possible about new pieces of information

    • This transparency builds a positive culture as workers appreciate the honesty from management

Reduces costs

  • Good communication allows managers and employees to minimise mistakes, which reduces costs

  • Many forms of effective communication are cheap and easy to use, such as email or social media messaging

  • Starbucks has invested in the idea of employees as brand ambassadors and highlights the need for good communication between employees and management

    • Workers are more likely to stay with the company and  produce higher-quality goods and services, reducing costs

Promotes customer satisfaction

  • Better and regular communication with customers will increase sales as customers build a relationship with the brand 

  • Lidl Ireland practices good PR through its sponsorship of Women's Gaelic Football

    • This shows their appreciation and support for Irish culture, helping to maintain and grow a relationship with customers in Ireland

Problems of Ineffective Communication

  • Ineffective communication occurs if communication is not received or understood properly

    • This may reduce business efficiency and increase mistakes or wastage

  • Ineffective communication may also confuse customers or stop them receiving a message

    • This can negatively impact a business’ sales and profitability

  • Many businesses invest heavily in trying to improve communication in and outside of the business to experience all of the benefits that good communication provides

    • E.g. more motivated employees

The Effects of Poor Communication

Less Motivated Employees

Increasing Costs

  • If workers feel less informed about their role or tasks, they may feel less motivated

    • This can cause a decrease in productivityand lack of morale

    • In the longer term, labour absenteeism and labour turnover may increase

  • Delayed projects, increasing defects and a lack of co-operation amongst staff are all examples of factors that can cause rising costs for a business

    • Ineffective communication can have a significant impact on costs, lowering profits and effecting overall business performance

Inefficiency & poor Business Performance

Inaccuracy & Mistakes

  • If messages are delayed or not sent to the right receiver, decision making and processes will slow down

    • This can lead to a rise in costs and potentially missed opportunities for the business

      • E.g. a business may be too late to secure a deal with a new supplier due to poor communication

  • Inaccurate information can lead to mistakes being made such as products of a poorer quality or a compromise to customer safety

    • E.g. miscommunications between colleagues may lead to some safety checks for a new toy being missed or rushed

Examiner Tips and Tricks

In your exam you may need to explain one reason why poor communication causes problems for business. These questions are worth 3 marks. The table above provides a good structure for your response.

Example

Poor communication leads to inefficiency in a business. If messages are delayed, or not sent to the correct receiver, decision-making can be slowed down. This might mean a business misses opportunities such as securing a deal with a new supplier.

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Lisa Eades

Author: Lisa Eades

Expertise: Business Content Creator

Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

Steve Vorster

Author: Steve Vorster

Expertise: Economics & Business Subject Lead

Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.