As Level Business Basics

Business Studies - CIE- AS - NOTES 28/09/2022
CONTACT - 070 288 4024

@lovebusiness_byazeena
Cambridge AS Level
BUSINESS STUDIES –9609
business.studies_bymsazeena
Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

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A01- Knowledge/ Definitions

A02- Application to case
study/business context
A03- Analysis
A04- Evaluation

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Business Activity
A business is an economic activity which manufactures or provides different goods and services in order to fulfil
human needs. Most of the firms are profit oriented whereas some firms are non- profit oriented.
Man has needs and wants from birth to death. These needs and wants are fulfilled by businesses. Businesses
manufacture and distribute various goods and services according to the human needs and wants.
What are Needs?
Needs are requirements that must be fulfilled essentially for existence. Food, clothing and shelter are considered as
the basic human needs.
What are Wants?
Wants are different ways of satisfying needs. A single need can be satisfied in different ways. Unlike needs, wants
are not considered essential for existence.
The following table illustrates the ways in which needs could be satisfied:
Example :-
Needs Wants
Food Pizza, Burger, Ice cream, Cake
Clothes Frock, Jeans, T-shirt, Saree
Shelter Mansion, Apartment, Villa, Slum
1.1- Differences between Needs and Wants
The following table contains a list of differences between Needs and Wants:
Needs Wants
It is essential to fulfill the needs for Wants are not considered essential for
existence. existence as that need could be
satisfied by another similar want
instead.
Needs are common to every individual. Even though the needs are common to
any individual, the way they satisfy them
with wants differs depending on their
personality.

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What is Scarcity?
Scarcity occurs due to unlimited wants and not having enough resources to satisfy them.
The main cause of scarcity is because of not having enough factors of production. The 4 factors of production
are:
Land – Natural resources from nature such as trees, forests and oil
Labour – Number of workers available to make products
Capital – Money required for a business to produce items this includes machinery, robots etc.
Enterprise – Entrepreneurs with skills required to create a business.
What is an Opportunity Cost?

A benefit/value that must be given up in order to achieve something else.
For example, if a bakery spends money on a new oven, the opportunity cost of the oven could be a new
refrigerator to store cakes.
FACTORS OF PRODUCTION
1. Land – Natural resources from nature such as trees, forests

and oil
2. Labour – Number of workers available to make products
3. Capital – Money required for a business to produce items
this includes machinery, robots etc.
4. Enterprise – Entrepreneurs with skills required to create a
business.

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Added Value = Selling price of the product – Cost of Production
Value added is the difference between the selling price of a product and the cost to produce it.
Added value can be increased by either charging higher prices for the same product or by reducing the cost of a product by lowering quality e.g.
using cheaper materials.

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The diagram illustrates how raw

materials are being extracted in the
primary production sector and how it
proceeds through the secondary and
tertiary sectors in order to reach the
final consumers.
The extra value given to products and

services as a result of production or
manufacturing processes, transport or
storage is called “Added Value”
Problems of business growth:

• Large businesses are difficult to control. Solution – Operate in business in small parts.
• Costs of expansion are high. Solution – Expand slowly
• There can be poor communication in large businesses. Solution – use technology to communicate e.g.
email. Operate the business in small parts.
Why do some businesses remain small?
• Type of industry e.g. hair salons stay small because of the connection with their customers, if they grow
too large they won’t be able to offer personal service to their regular customers.
• Market size Some businesses such as stores in small towns are likely to remain small due to the limited
amount of customers. Businesses that produce specialised goods such as brand name clothing or luxury
cars are also likely to remain small.
• Owner’s objective Some owners want to keep their businesses small to keep full control and know all
their employees and customers. Running a large business can become stressful.

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Why some businesses fail?

• Poor management – Many businesses fail due to poor management due
to the lack of experience of the managers and owners.
• Failure to plan for change – The business environment is constantly
changing, businesses need to change to keep up with technology, else
they will fail.
• Poor financial management – Shortage of money means that the
businesses cannot be operated efficiently. Businesses need to always
make sure they have enough money for the day to running of the
business.
• Over expansion – Some businesses expand too quickly and do not have
enough money to operate.
• Start-up risk – Starting up a new business is always risky, entrepreneurs
may lack experience and not be able to compete with larger businesses.
Entrepreneurs

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Characteristics of Successful Entrepreneurs

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Major challenges faced by entrepreneurs

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Impact of enterprise on a country’s economy

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Business Plan
A Business plan is a document with important information about a business such as the
business objective, operations, sources of finance, owners etc.
A Business plan is needed to:
• Apply for bank loans

• Attract potential business partners and investors to invest in the business
• Help a business to create plans to reduce risk of failure
Business plan includes:

• Full list and details of the products and services that will be sold
• Costs of the business
• Location of the business
• Full list of resources required to operate the business e.g. Machines, employees

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The diagram illustrates how raw

materials are being extracted in the
primary production sector and how it
proceeds through the secondary and
tertiary sectors in order to reach the
final consumers.
The extra value given to products and

services as a result of production or
manufacturing processes, transport or
storage is called “Added Value”

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Quaternary Sector
The quaternary sector of the economy is a way to describe a knowledge-based part of the economy which
typically includes services such as information generation and sharing, information technology,
consultation, education, research and development, financial planning, and other knowledge-based
services. The term has been used to describe media, culture, and government.
The term is a further delineation of the three-sector hypothesis of industry in the sense that the quaternary
sector refers to a part of the third or tertiary sector along with the quaternary economic sector. It has been
argued that intellectual services is distinct enough to warrant a separate sector and not be considered merely
as a part of the tertiary sector. This sector evolves in well developed countries and requires a highly educated
workforce.
The quaternary sector consists of those industries providing information services, such
as computing and ICT (information and communication technologies), consultancy (offering advice to
businesses) and R&D (research, particularly in scientific fields).

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Sole Traders

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Partnerships
Limited Companies
PVT LTD at the end of the company

name
Private Limited Company
Shares are sold to friends/family
Submit:
Articles of Association Registrar of Companies Certificate of Incorporation PLC at the end of the company name
Memorandum of Association
Shares are sold to the ‘General

Public’ via the Stock Exchange.
Public Limited Company
A prospectus will have to be issued

prior to selling shares.
The risk of having unsold shares will

have to be insured by paying a fee to
an underwriter to buy the unsold
shares.

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Private Limited Companies
Public Limited Companies

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Social Enterprises
Co-operatives

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Joint Ventures Definition-
Advantages
•Costs can be shared amongst the companies.
•Knowledge and skills from more than one
company.
•Risks are shared (If the project fails, losses are
shared)
Disadvantages
•Profit is shared
•Businesses may disagree with each other.
Franchising
Definition-
Franchisee (Business party that buys

Franchisor (Owner of the Business
the Business Idea)
Idea)
Eg- Abans bringing down McDonalds
Eg- McDonalds
to Sri Lanka

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Definition- Definition-

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Methods and problems of measuring business

size:
•Number of employees – Easy to calculate and compare with competitors. However, some
businesses can produce higher output with fewer employees. e.g. Some factories uses
machines.
•Value of output – Easy to calculate and compare with competitors. However, some
businesses may be very small but producing very expensive products such as branded
clothing while a very large factory may be producing cheap unbranded clothing.
•Value of sales – Easy to calculate and compare with other businesses. However, value may
be different for businesses for example, a sports car dealer may sell 2 cars a day while a
normal car dealer e.g. Toyota may sell 20 cars a day.
•Value of capital employed – Simple to compare with other businesses. However, this method
is inaccurate because different factories will use different types of capital e.g. A factory may
use expensive machinery and another may depend on employees.

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Business Growth/ Expansion
Examples of External Growth:
Horizontal Merger/ Integration

Vertical Merger/Integration (Forward & Backward)
Conglomerate Merger/Integration

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Reasons why owners of a business want a

business to expand:
• Increased chances of earning a higher profit for the owners

• Better status and prestige for the owners and employees
• Lower average cost (more negotiating power with suppliers)
• Increased control of the market as the business has a larger proportion of
sales in the market
Internal Growth External Growth
Define the
terms:
Merger Takeover

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Horizontal Integration Conglomerate
Define the
terms:
Vertical Integration Forward Vertical Integration Backward

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Problems of business growth:

• Large businesses are difficult to control. Solution – Operate in business in small parts.
• Costs of expansion are high. Solution – Expand slowly
• There can be poor communication in large businesses. Solution – use technology to communicate e.g.
email. Operate the business in small parts.
Why do some businesses remain small?
• Type of industry e.g. hair salons stay small because of the connection with their customers, if they grow
too large they won’t be able to offer personal service to their regular customers.
• Market size Some businesses such as stores in small towns are likely to remain small due to the limited
amount of customers. Businesses that produce specialised goods such as brand name clothing or luxury
cars are also likely to remain small.
• Owner’s objective Some owners want to keep their businesses small to keep full control and know all
their employees and customers. Running a large business can become stressful.
Why some businesses fail?

• Poor management – Many businesses fail due to poor management due
to the lack of experience of the managers and owners.
• Failure to plan for change – The business environment is constantly
changing, businesses need to change to keep up with technology, else
they will fail.
• Poor financial management – Shortage of money means that the
businesses cannot be operated efficiently. Businesses need to always
make sure they have enough money for the day to running of the
business.
• Over expansion – Some businesses expand too quickly and do not have
enough money to operate.
• Start-up risk – Starting up a new business is always risky, entrepreneurs
may lack experience and not be able to compete with larger businesses.

- CONTACT 070 288 4024 40

- CONTACT 070 288 4024 41

As Level Business Basics

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Business Studies - CIE- AS - NOTES 28/09/2022

CONTACT - 070 288 4024

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

A01- Knowledge/ Definitions

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

What are Needs?

What are Wants?

1.1- Differences between Needs and Wants

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

What is an Opportunity Cost?

1. Land – Natural resources from nature such as trees, forests

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Added Value = Selling price of the product – Cost of Production

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

The diagram illustrates how raw

The extra value given to products and

Problems of business growth:

• Costs of expansion are high. Solution – Expand slowly

Why do some businesses remain small?

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Why some businesses fail?

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Characteristics of Successful Entrepreneurs

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Major challenges faced by entrepreneurs

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Impact of enterprise on a country’s economy

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

A Business plan is needed to:

• Apply for bank loans

Business plan includes:

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

The diagram illustrates how raw

The extra value given to products and

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

PVT LTD at the end of the company

Private Limited Company

Shares are sold to friends/family

Shares are sold to the ‘General

Public Limited Company

A prospectus will have to be issued

The risk of having unsold shares will

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Private Limited Companies

Public Limited Companies

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)

Prepared by Mrs.Azeena (BBA-UK, MBA-UK)