Unit IGCSE Understanding Business Activity 0450 Cambridge Business Studies

1.
IGCSE Business Studies

Unit 1: Understanding Business
Activity
2020 - 2022 Course Cambridge H. Gilmour

1: Business Activity
Unit 1: 2: Classification of Business
Understanding 3: Enterprise, Growth and Size
Business Activity 4: Types of Business

Organisations
5: Business objectives and

Stakeholders
2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

L1 (1:0) Business Activity: Introduction to Business
1. Think about what makes a good

business.
Learning 2. Get familiar with the idea of

salesmanship and selling.
Objectives 3. Understand that business success
can be related to external factors
like market conditions.

Consider this: Here are four products (the

images to the right) that are aimed at
different markets. Which do you think are:
a) Easiest to sell
b) Most profitable
c) Have a niche or small market
d) May not sell
e) Will be most affected in a recession
f) Have lots of competition

10 MINUTE ACTIVITY (GROUPS): You will be given a

range of business ideas. Your job is to critically evaluate
them. Give your opinion on the following in relation to each
product. Good luck.
a) Can they be successful?

b) Who are they aimed at (we call this a segment)?
c) Is it a niche market or mass market?
d) Are they country relevant, will they only succeed in a
certain country?
e) Would you invest in the idea?
1. Boggles (goggles for dogs 4.) Fishless aquarium

2. Santas mail (letters from Santa) 5.) Obama on a stone!
3. Pet Rock (a rock in a box) 6.) Plastic wishbones

1. Boggles for dogs is a pair of glasses for dogs!

2. Santas mail is a subscription service where you pay to receive
a letter from Santa!
3. Rock in a box is a training toy for kids who want a pet, but
their parents think the child is not ready yet!
4. Fishless aquarium is just as described. A little biohome
without the mess and stress of pets!
5. Obama on a stone are printed pictures of ex president Barack
Hussein Obama on a stone!
6. Plastic wishbones are for those people looking for some luck,
but can’t find a chicken wishbone!

ACTIVITY REVIEW: These are all actual products that were a

genuine attempt to make money! All were highly successful and
made their inventors wealthy, except for one!
The single item that was unsuccessful was, ‘Obama on a stone’!
Some of these items show that the market sometimes values novelty
over function and that economic conditions can sometimes reward
the strangest gimmicks. Rock in a box for example was a cheap gift
that suited the poor economic times when many had no money and
were struggling financially! It was also a novelty and ticked two
boxes!

ACTIVITY: In pairs...you have been tasked with selling an item.

You will have 5 minutes to prepare your ‘sales pitch’. You have to
be as creative as possible and think of as many uses as possible for
your product (see right).
Confident salespeople will be asked to present (pitch) their

product to the investors (class).
The investors (class) will decide on a winner. That honor will

mean that the winning pair will be awarded sales team of the
week!

L1 (1:0) Business Activity: Needs, wants & scarcity
Grade (UK) Grade Answer the questions according to the grade you want
8-9 A* Explain why rock in a box was successful in a time when the economic
conditions were bad (recession).
7 A How can a recession affect a product? Which products might be more

severely affected by a recession?
6 B What is a market segment? Give an example of a product that fits a particular

market segment.
4 C What is the difference between a product and a service?
3 D Give an example of a product for a mass market.

1. To be able to define a need and a

want.
2. To be able to classify needs and
Learning wants of customers and
business.
Objectives 3. To be able to consider the idea of
‘opportunity cost’ and estimate
based on different choices.

Consider:
a) What do you think are your fundamental needs in life?

b) What are your wants in life?
c) Create two lists and compare the size!

Consider: What could these two images represent? Write down

your ideas now.
Trainers versus dinner for two

The two images represented a fundamental economic choice. Wants are unlimited,
resources are limited, which creates scarcity. You have to make a choice.
Every choice creates an ‘opportunity cost’.....which is the, ‘cost of the next best alternative
forgone’!

EXAMPLES OF ‘OPPORTUNITY COST’
a) Attending university will ‘cost’ you….3 years of lost income if you had a
job!
b) Spending money on earphones will leave you without money for a phone
top up!
ACTIVITY: What could be the opportunity cost of the following?
● Pair of trainers
● Buying land to build a house on
● Going to university to become a doctor.
● Spending your savings on a new laptop!

The Opportunity Cost is

due to ‘Factors of
Production’. There are 4
factors of production
(FOP)
LAND, LABOUR,
CAPITAL &
ENTERPRISE

Production of any good or service requires resources or Factors of Production. These

are divided into four categories, (L, L, C, E).
Land: natural resources in the production process ( oil, coal, water, wood, metal ores
etc).
Labour: human resources in the production process ( skilled and unskilled labour).
Capital: manufactured resources in the production process (such as machinery, tools,

equipment and vehicles).
Enterprise: skills and education. Ability to mix the other 3 to create and sustain a
business.

What do you need for a can of Cola in terms of FOP (L,L,C,E)
Capital: machinery, tools, a factory building and trucks.
Enterprise: skills to organise production and motivate workers.
Labour: all of the jobs + manpower needed at the factories.
Land: the natural resources (such as sugar, water and caffeine).

https://www.youtube.com/watch?v=7c4NRcKDrzw&t=5s

Proportions of LLCE:
Some students notice that you need L,L,C & E for almost any good!
However, they are required in different proportions!
ACTIVITY: Which order of L, L, C & E (from largest to smallest)

would you list for the following items?
a) A high technology internet business
b) A farm growing vegetables
c) A high technology manufacturing plant for cars

8-9 A* Understand how countries can increase their factors of production and give an
example. Comment on why this will be considered as ‘in the long term’.
7 A Explain what is scarcity and why does it lead to opportunity cost? Give an
example, using one of the four factors of production.
6 B Define opportunity cost and give a real life example.
4 C Define needs and wants
3 D List the four factors of production.

L3 (1:0) Business Activity: Specialisation
1. Be able to define Specialisation

2. Understand the root of
specialisation and why it is
Learning needed.
3. Provide real world examples of
Objectives specialisation to show your
understanding.

Consider: How many of these jobs can you master in a lifetime?

● Be a top computer programmer
● Design a building
● Win the London Marathon
● Qualify and perform a brain surgery
● Become a proficient photographer
● Become a successful stock market trader
Write down any difficulties in becoming any of the above!

Consider: How do you produce more when you’re

working 100% flat out? Write your answer down in
your book.

There are two answers to the above question of

‘how do you produce more if you are working flat
out’.
1. Improve your efficiency

2. Specialise

You can only improve your efficiency so far. Now

the same question again!
‘How do you improve if you are working flat out

and as efficiently as you can’?
Specialise

You can only improve your efficiency so far. Now

the same question again!
‘How do you improve if you are working flat out

and as efficiently as you can’?
Specialise

Specialisation is “the concentration by workers, on a

particular task or a narrow range of products”
It is when we concentrate on a task or product/service with

a view to excellence and or producing more.
Can you think of any businesses?
Watch a true master of specialisation: Roberto Carlos at
work.
https://www.youtube.com/watch?v=41DPTAruWfk

The idea of specialisation came from an Economist

named Adam Smith. He wrote ‘The Wealth of Nations’
(1776).
He outlined the concept of specialisation, which he called
‘Division of Labour’
He looked at efficiency and decided that if you break
individual tasks down and have workers, ‘specialise’
then you can increase output.

Consider: Which is the odd company out? Which company makes a range of things and which
specialise?

ACTIVITY: In groups or individually…
Go online and start looking for example of a) companies

who specialise in a single product and b) individuals who
specialise in making or doing something exceptionally
well. Record your findings.

L4 (1:0) Business Activity: Specialisation II
1. To show understanding of
specialisation from the first
lesson.
Learning 2. Apply specialisation to the
Objectives production of a product.
3. To appreciate that specialisation
can be applied to companies to
increase output.

ACTIVITY: Split the production of burgers up into 10 different

stages in a burger factory. What specific jobs go into making a
burger!
QUESTION: What would you expect to happen to production

after splitting the burger process into individual elements and
asking somebody to specialise in each step?

RECAP: The division of labour occurs where production is

broken down into many separate tasks.
Division of labour raises output per person as people become

proficient through constant repetition of a task – “learning by
doing”.
QUESTION: What do you think is the main benefit to the

producer and consumer?

• Workers may become bored

• Workers are trained in one task
• If a worker is absent, nobody can fill in
• This increases efficiency
for them!
• Less time wasted moving from one bench
• Equipment to support specialisation can
to another
be expensive.

Watch the video on production of

American footballs at the Wilson
factory.
ACTIVITY:
1. What evidence is there of

specialisation?
2. Can you see any possible negatives to
specialisation within the video?

8-9 A*
7 A Is specialisation always positive? Describe the possible negatives of

specialisation in relation to a McDonalds worker who deals with cooking
burgers or to another case that you have learnt about.
6 B Explain with reference to a real world example how specialisation increases

output.
4 C How does specialisation increase output?
3 D Define specialisation

L5 (1:0) Business Activity: Added Value
1.)Understand the term,

‘added value’.
Learning 2.) Explain the importance of

business survival and
Objectives success.
3.) Identify different ways to
add value to the business.
4.) Be able to perform an
added value calculation.

What is added value?
“The increased worth that a business creates for a

product. It is the difference between what a business
pays for the product and the price that is able to charge
for the product/service”.
Let’s have a look at a simple example.

What is added value?
“The increased worth a business creates for a product. It is the difference between what a business
pays for the product and the price that is able to charge for the product/service.

The three images represent value added at each stage of the production process. Value is added
along the chain, starting from Primary to Secondary to Tertiary sectors.
PRIMARY SECONDARY TERTIARY

$0.50 $2.50 $75.00

In this example we add value as we move along the chain. Each

successive stage adds more value. Producers must add enough value
to cover the costs, otherwise business survival is threatened! The
Business will make no profit.
CONSIDER: Which stage has proportionately the largest value

added? And which has the least?
CONSIDER: In this example, which sector would you prefer to be

in? Primary, Secondary or Tertiary?

Here’s another example of value added.
Activity: The land cost $100,000 to purchase. The building materials

cost $70,000 to purchase. If the selling price of the house was
$250,000 how much added value would there have been?
Harder question: What costs have not been accounted for?

L5 (1:0) Business Activity: Added Value (a how to guide)
Before we get to the detail: There are two basic ways of adding value.
1. Increase the selling price
2. Reduce costs
Both these come with a warning as increasing prices may deter customers. Reducing
costs can be synonymous with lowering quality, which might also deter customers. So?
Adding value requires careful thought.

L5 (1:0) Business Activity: Added Value (a how to guide)
1 Convenience & speed: In today’s world, customer expect stores to be near and want
fast service. People will pay extra to save time. Delivery is now very popular for takeaways.
2 Good design: Customers are often happy to pay more for unusual or unique designs,
which let them feel they have a special product.
3 Packaging: Can make products stand out and add value.
4 Quality: as incomes rise, customers increasingly want high quality goods that will last.
5 Brand name: These seem important to people to give them status.
6 Unique selling point (USP): that certain je ne sais quoi that makes the product stand
out from the other competitors!

ACTIVITY: 1.) Select a product that has been recently

successful in the marketplace. 2.) Analyse it against the 6 criteria
on the preceding slide. Make a comment on each criteria
explaining whether you think the product has been successful in
adding value on this point. Write a short report.
NB: If you are stuck, choose Apple AirPods, one of the most
successful value added products of al time. Just think..once upon
a time, we paid $5 dollars for ear phones and now we are happy
to pay $150 for removing the wire and an attractive package!

Setting a price: For even simple products, there is often more

work involved in getting the product to the shelf!
For example: a bottle of mineral water
1. Filter the water

2. Create plastic bottle and lid (after a design and manufacture
process)
3. Advertise
4. Pay to store inventories (unsold water)
5. Print the label
6. Transport to location of sale

ACTIVITY:
In pairs, decide on a strategy to add value to two of the following

products. Make notes on the 6 points and get ready to present
your strategy.
1. A basic cheese and tomato pizza to sell in supermarkets

2. A traditional blue biro
3. An I-Phone cable
4. A Samsung phone case for wealthy individuals
5. A football shirt which is personalized
6. Exercise books for students at school

8-9 A* Confident compare two similar competing products and explain how
they have each added value.
7 A Describe a well known business. Research a product in their
portfolio and describe how they have added value.
6 B How can businesses create or enhance added value? Include 4
methods.
4 C Explain added value with reference to an example.
3 D Define added value

L1 (1.2) Classification of Business: Industry Sectors
1 - To be able to recognise
and classify the Primary,
Tertiary and Secondary
Learning sectors of industry.
Objectives 2 - To be able to make an

informed comment on the
decline of the Primary sector
in Western countries.

L1 (1.2) Classification of Business
CONSIDER: Which pictures represent

the primary, secondary and tertiary
sectors?
PRIMARY: Resource extraction
SECONDARY: Manufacturing
TERTIARY: Selling of goods and

services

In specialisation, we saw the sheep, wool and jumper images (below). They represent
three sectors of the economy. We will focus on them again, but in more detail.
PRIMARY SECONDARY TERTIARY

L1 (1.2) Classification of Business
ACTIVITY:
1. Look at the two graphs opposite. What can you

observe in terms of the percentage change in Primary,
Secondary & Tertiary?
2. Describe what this means in terms of the quantity of

‘things’ that the UK is a) Extracting b) Producing and
c) Selling.

De-industrialisation 1: The graphs show a common pattern for

EMDC’s where the Primary and Secondary sectors are shrinking
whilst the tertiary economy expands.
This process is called de-industrialisation and is common in Western

countries. The UK (for example) used to have a huge Primary and
Secondary sector. They have diminished over time and been replaced
by Tertiary sector (the service sector). These changes are normally
measured by
a) % all people employed in a particular sector

b) % of total GDP that is attributable to a sector

De-industrialisation 2:
LEDC’s can often have large Primary and Secondary sectors.. In

many cases their economies are still making changes like
Western economies.
It is said that they are still ‘transitioning’ to a more service driven

economy (tertiary sector).
Some MEDC’s are said to have run out of resources to extract

and so transitioned to other sources of revenue.

De-industrialisation 3:
Often cited reasons for deindustrialisation
1) Sources of raw materials have been depleted.

2) MEDC’s cannot compete on price compared to
LEDC’s over raw materials.
3) Rising incomes in MEDC’s mean consumers spend a
higher proportion of income on holidays and restaurants
than manufactured goods.

Business Primary Secondary Tertiary ACTIVITY:
Diamond mining
1 - Write down each business type
Pet insurance and a P / S / T in your books to
Diamond retailing
indicate which sector you think
the business belongs to.
Investing in shares
School copy books

2 - Which businesses do you think
add the most value? Give a
Sheep shearing justification for you answer.
Fishing

8-9 A* Explain in your own words why the UK has lost its advantage to LEDC’s
in terms of raw materials. (Clue) think about costs.
7 A Explain fully at least two reasons for de-industrialisation in MEDC’s.
6 B Explain the term deindustrialization and give evidence of how you know
it is happening in the UK.
4 C List the three sectors of industry. Give an example of which businesses

appear in which sector to show your understanding.
3 D Define value added.

L2 (1.2) Classification of Business: Privatisation & Mixed Economies
1. Understand the term

Mixed Economy.
2. Identify likely
Learning components of in
private and
Objectives government owned
sectors.
3. Define and evaluate
privatisation.

Consider these two statements:
1. Government should own and run schools as they do

so in the best interests of most people. They should
be free as most people cannot afford to pay for
school!
2. Private businesses should run schools as they could

charge money (fees), improve standards, make
profit. Improvements would benefit both customers,
private business (who would profit) and
Government who could ‘earn’ tax revenue!

This is how the

UK
Government
allocates its
spending in the
Public Sector
for 2016/2017.
Notice that
education sits in
fourth place!

In the modern world, almost all countries are now MIXED ECONOMIES.
This means that there is a mixture of Public and Private sector.
Features of a Mixed economy include
1. Production decisions: are made by a mixture of Government and

Business
2. Wages can differ hugely
3. Business provides things according to demand

ACTIVITY: Using the information on the next slide, you will

debate whether you think the Government should keep most of
education in the Public Sector (Government owned) or whether
you think Private Business should be able to buy schools and run
them for profit (privatisation)!
Plan your argument and get ready to go head to head!

Arguments to keep schools Government owned Arguments to privatise and let schools run for profit
1. Schools are too important to let private business run 1. Government spends too much on education.
them (privatisation). 2. Government cannot run schools efficiently as there
2. British education is loved and admired worldwide. are too many and standards are slipping!
You can’t let private business change that by 3. Government spending is wasted as UK Education
introducing profit the motive! standards are falling (just check the international
3. Most people cannot afford to pay fees for a school. leaderboard).
This would be unfair and disadvantage lower 4. Selling schools to the private sector (privatisation)
income families! would generate lots of yummy money for
4. Education would not get better as private Government and improve their finances!
companies will focus on profits and not quality of 5. Private companies run things more efficiently!
education. Standards will improve. It’s good for everybody.

Activity Research Task: Find out who owns the following

industries in the UK and another country.
● Water
● Electricity
● Health
● Education
● Electricity supply
● Defence
Create a short report of your findings.

8-9 A* Create a balanced argument of why schools should remain in the Public
sector in the UK. Give your own opinion as to which sector you think most
schools in the UK should remain in. Public or private.
7 A Make an argument to allow privatisation of some schools in the UK. Use a

number of persuasive arguments.
6 B Explain why the Government keeps control of certain industries.
4 C List three features of a Mixed Economy.
3 D Define a mixed economy.

L1 (1.3) Enterprise, growth & size: Entrepreneurs
1. Know and
understand the
term,
Learning ‘entrepreneur’.
Objectives 2. Be able to explain
reasons for and
against becoming an
entrepreneur.

Consider: Here is a statement.
“Being an entrepreneur (self employed) is better

than being employed”!
Discuss and write down whether you agree or

disagree! Create a list of benefits and drawbacks to
organize your ideas!

● No boss
● If you succeed you will have a
business to be proud of any
possibly loads of cash
● Keep all the profit
Possible drawbacks /
● No stress from a boss Become
disadvantages?
famous
● Show off talents
● Run your business how you want
● You take the credit

It is thought that to be an entrepreneur, you need certain

key characteristics.
Activity:
Have a look at this list of characteristics and explain why

each might be needed for success.
Hard working, risk taker, commitment, innovative,

optimistic, good communicator and independent.

Why do Government support startups?
Employment
Increase competition
Increase output
Benefit society
Can grow further
Tax (although it's not in the textbook)

ACTIVITY: Write an explanation of each of the points below

(from the slide above). Why for example do small business
benefit the economy in terms of employment?
Employment
Increase competition
Increase output
Benefit society
Can grow further
Tax (although it's not in the textbook)

ACTIVITY: Read the article (click the link or

the screen)
https://www.gov.uk/government/news/small-fir
ms-benefitted-from-over-12-billion-of-governme
nt-spending
Questions on the next slide

ACTIVITY: What does the article say about?
1. What are SME’s?

2. How do the Government describe small
businesses?
3. By what year does the Government want to
spend 1 pound in every 3.
4. What benefits did Caroline Nokes talk about
in relation to small businesses?
ACTIVITY: Watch the video as it’ll help you

with the next set of questions.

Government support small Business for the

following reasons (see image left).
In addition, they also support economic

growth (GDP).
Can stimulate improvements in areas that

suffered from deindustrialisation (like the
North East of the UK for example).

What support specifically does the Government give to

small business?

ACTIVITY:
You work for the local Government and are encouraging small businesses to apply for
help and support in establishing a local business.
Your task:
1. Explain to potential entrepreneurs what you have available to help and assist
them get started.
2. Design your information document as realistically and informatively as
possible.
3. To make the task more realistic, you can refer to documents and news reports to
give you a feel of how they are written and what they look like stylistically.

EXTENSION ACTIVITY:
Choose and research an entrepreneur.

Create a basic fact sheet regarding
a) What do they do?
b) When did they start?
c) Do they have more than one business (if so what are they)?
d) Can you find clues as to their personality (traits) of risk, hard
work etc.

L2 (1.3) Enterprise, growth and size: Business Plans
1. To understand the need for

a business plan.
2. To be familiar with the
Learning main sections of a business
plan.
Objectives 3. To be able to explain the
inclusion of the major
elements of a business
plan.

A Business Plan is an
essential document to produce,
if launching a new Business.
It includes sections on your

costs, location, resources,
money in and what you need
to borrow, what you’ll make,
anticipated profit, your name
and aim and how you intend to
make it.

If you are setting up a new business; you need a Business Plan.

Particularly if you will approach a bank for a loan.
They will want to see a Business Plan.
ACTIVITY: The next slide shows a transcript between an entrepreneur

and a bank manager. Your Task is to
1. Role play it with two people in front of the class.

2. Write down whether you think the bank manager will agree to loan
the entrepreneur the money he is asking for.
3. Decide on which points the entrepreneur is weak.
4. Write down any points that you think the entrepreneur could have
mentioned.

Bank Manager: Good morning. How can I help? Entrepreneur: I’d like to borrow some money for a great
new business idea!
Bank Manager: Great. Can you tell me what the idea is?
Entrepreneur: Sure, I’m going to make an new updated
version of the fidget spinner!
Bank Manager: Excellent. What inspired you? When
will you start and how will you finance it?
Entrepreneur: I want to make some fast cash. I’ll start as
Bank Manager: How much do you require? soon as you lend me the money.
Bank Manager: I repeat…..how much do you require? Entrepreneur: How much can you lend me?
Bank Manager: Okay (writing it down). Can you show Entrepreneur: Not sure. About 30 thousand pounds.
me your business plan please?
Entrepreneur: Sure…. I’ve sketched my idea on this
napkin for you! How’s that?

ACTIVITY: Here’s a budding entrepreneur named John. He proposes to

set up his own photography business working from a studio. He has
$5000 saved, but needs to borrow some money to cover his costs.
His costs and info about him are outlined later in these slides.
He plans to buy all new equipment and rent a studio.
1. Your task is to create a business plan for John so he can present it

to the bank. The exact details of what you must include are
outlined on the next slide.

More info about John the photographer: Even more info about John:
John has been a photographer for 15 years. He He believes he can make money in photography
recently started photographing his friends by covering weddings and portraits of people who
weddings. come to his studio.
He realised that this market is profitable. He
started thinking about launching this as his He proposes to charge $1000 per wedding and
business. $250 for a portrait session.
Sadly, he doesn't’ have much money so will need
to borrow from a bank. However, he needs to His costs are fairly limited to travel, which he
persuade a bank that his idea is worth lending to. thinks he will spend roughly, $100 per month
He has no assets and $5000 in savings. (pcm).

ACTIVITY BUSINESS PLAN: Writing a Business Plan
1. Write a business plan for John. It must There are lots of different formats to use. I would
comment on the following; like you to use a professional one to get a view of
2. Business name how you could organise yours.
3. What he is planning
4. Why Click here for a Barclays Business Plan example.
5. Who will work at the company.
6. How much he needs to borrow
7. How long will it take to pay back
8. What is the main equipment needed?
9. What are the main costs involved?

John Costs ($) John Costs

continued
Studio Rent $1000/pcm Spares $200
Insurance $125/pcm Website hosting $30/pcm
Nikon D4 $4000 Batteries $20

Camera
Lenses $2000 Advertising $100/pcm
Lighting $1000 Miscellaneous $50/pcm
Tripod $140 Travel $100

Remember this disastrous conversation? ACTIVITY: Rewrite the dialogue between the Entrepreneur
and the Bank Manager.
Bank Manager: Good morning. How can I help? Use John the photographer for the entrepreneur this time.
Entrepreneur: I’d like to borrow some money for a great Make the dialogue
new business idea!
a) more successful by including relevant details.
Bank Manager: Great. Can you tell me what the idea is?
b) complete by taking the conversation through to the end.
Entrepreneur: Sure, I’m going to make an new updated
version of the fidget spinner! c) you can finish the dialogue with the bank either declining
the money, offering the money or saying, “I’ll get back to
you”.

L3 (1.3) Enterprise, growth and size: Business Growth
1. Understand that
stakeholders are interested
in the size of a business.
Learning 2. Know and understand the
various criteria by which a
Objectives business can be measured.

Starter Question: Why would the following people

wish to know how large a business was?
a) Investors
b) Governments
c) Competitors
d) Workers
e) Banks
f) Environmentalists

Activity: For each image, note down the following:

a) How many people you think work there
b) Describe how big you think it is
c) How much money do you think they make? (and how could you know)?

There are four basic methods to examine the size of a

business:
1. Number of employees
2. Value of output
3. Sales
4. Value of Capital employed
Unsurprisingly, each has its own advantages and

disadvantages.

QUESTION: Why do you think comparing

business size might be difficult for the following
two businesses?
a) A local supermarket chain of stores & a weapons

manufacturer?

EMPLOYEES VALUE OF OUTPUT
+Easy to compare. +Easy to measure
- May be deceiving if you have when Maybe misleading depending on high or

comparing Labour Intensive business low value products
versus Capital Intensive business!
Bugattis (high value, low sales)
-Does job sharing count as 1 or 2
employees? Cigarettes (low value, high output)

VALUE OF CAPITAL EMPLOYED VALUE OF SALES
“Total value of capital employed” Often used to compare retail businesses.

It is a useful benchmark of business in
This can be misleading again, due to the the same industry.
nature of CAPITAL INTENSIVE AND
LABOUR INTENSIVE BUSINESS. However, misleading when comparing
totally different products, e.g low value
MEDC’s farms for example could be sweets from a kiosk versus high value
labour intensive, but have low capital confectionary from a specialist provider.
employed and vice versa.

1. Which is the biggest company?

2. Which employs the most
capital?
3. Which has the highest value of
output?
4. Which company has the most
efficient employees?
5. Which company has the
greatest return on capital
employed?
ACTIVITY: Write a brief report on the size of these 4 6. Based on the
calculations….which company
businesses. Answer the questions opposite. You will have to do you think is performing the
think carefully about how to use the data to analyse best.
performance. There are some clues on the next slide! 7. Which is the ‘worst’ performing
company?

Return on Capital (Output / Input * 100)
Company C: 160 / 60 * 100 = 267%
Company D: 150 / 180 * 100 = 83%
Value per employee (Output / Input * 100)
Company C: 160,000,000 / 3000 = $53,000/person
Company D: 150,000,000 / 15000 = $10,000 / person

L4 (1.3) Enterprise, growth and size: Is growth always good?
1- Appreciate the common

reasons why Businessmen and
Learning women want to grow their
businesses.
Objectives
2- Know and understand some
of the pitfalls of growing a
business too big and or too fast.

STARTER QUESTION:
Consider these pair of statements
1. Business Growth is always good!
2. There are problems associated with business growth!
PRODUCE a list of reasons why you would a) want to grow

and b) any anticipated problems with growing either too big or
too fast.

1.) Profit allows the

entrepreneur to either a)
Common reasons for pocket more money or invest
wanting growth… more money in the business.
1.) Profit 2.) Status allows the business

owner to feel good and be
2.) Status admired….a little bit like how
everybody admires Elon
Musk for example!

3.) Market share
Common reasons for The bigger % of the total

wanting growth… market a business occupies,
the greater market power a
business has. This confers
3.) Market Share advantages such as raising the
price or producing more
cheaply.

4.) Economies of scale (EOS)
A business may benefit from

Common reasons for EOS if they grow large enough.
wanting growth… This means their average unit
cost may fall. This in turn leads
to greater profitability.
4.) Economies of Scale (EOS)
Bulk buying is one reason for
EOS and falling average unit
costs.

Quantity Cost
ACTIVITY: Plot this data on an graph. 100 $5

Label the X axis quantity and the Y axis Average Unit cost.
This business produces attractive silver pens for business 200 $4.50
people.
300 $4.00
a) Plot the graph for cost of 400 $3.50

b) Comment on the shape of the curve
c) What is the graph telling you about producing more units? 500 $3.00
d) Speculate on whether you think this trend will go on 600 $2.00
forever!
700 $1.00

Quantity Cost
EXTENSION ACTIVITY I: ‘DISECONOMIES OF SCALE’ 800 $1.5

(DOS).
900 $2.0
a) Plot the graph for the old costs and the new costs (right)
1000 $2.5
b) Comment on the shape of the curve
c) What is the graph telling you about producing more units 1100 $3.0
(the time)?
d) What is the optimum number of pens to produce? 1200 $4.0
e) Why do you think this is happening? 1300 $4.0
f) Find reasons why this may be happening.
1400 $4.5

Why do some Businesses stay small?
Ownership structure: Sole Traders are unlikely to grow too

large with just one person!
Type of industry: Imagine a wedding dress maker. If they are

to offer a highly personalized service then they necessarily
cannot be too large! They are constrained.
Owners Objectives: Some entrepreneurs want to balance life

and profit. They may have a family and not wish to grow to
epic proportions.

ACTIVITY: Read the case study below and answer the questions about,
‘why big business fail’ on the next slide.
Jack had just converted his toys business into a PLC and started trading in
China and the Middle East as well as the UK. He struggled massively with
the language barrier, time zones and cultural differences. He found he was
having to be contactable all day and night to account for the time differences
as well as the weekend as the Middle East have Sunday as a working day! He
had taken on lots of unqualified employees recently who needed a lot of
training and took all of his time. This took him away from critical activities,
such as Finance and organising. He was struggling to balance family life and
business. He had also started selling a greater range of products on his
website, which he was constantly updating. He needed to hire another
manager, but didn’t trust anybody and so ended up doing more and more of
the daily tasks himself!

ACTIVITY: Answer the questions from the case study in

the above slide.
a) What is the basic problem that Jack is struggling with?

b) Identify 5 problems that Jack has outlined from growing
either too large or too quickly.
c) Provide a solution to two of these problems.

L5 (1.3) Enterprise, growth and size: Methods of Growth
1 - Be able to list a number of

methods of business growth.
Learning 2- To be able to explain the

process of those methods.
Objectives
3 - Be able to contextualise
those methods by referring to a
case study.

EXTERNAL GROWTH
INTERNAL GROWTH
1. Merger
Profits are reinvested. This 2. Takeover
money is used to grow. 3. Horizontal integration
4. Vertical integration
It can be slow, but is also less 5. Conglomerate
risky than other methods.
This might suit an entrepreneur

who wants to stay relatively
small or limit risk.

ACTIVITY: Find a definition for each of the external

methods of growth.
1. Merger
2. Takeover
3. Horizontal integration
4. Vertical integration
5. Conglomerate

Integration can take place in two directions…..horizontal

and vertical!
Horizontal Integration: “When firms in the same industry

and at the same stage of production process combine to
form a larger business”.

ADVANTAGES OF DISADVANTAGES OF
HORIZONTAL HORIZONTAL
INTEGRATION INTEGRATION
Reduces competition, increases A conflict of aims and objectives

market share and power, which
may mean higher profits. Costs involved may be
significant.
Communication problems
Share new ideas.
Consumers: might have to pay
Benefit from Economies of scale higher prices and have less
EOS choice!

Integration can take place in two directions…..horizontal and

vertical!
Vertical integration: “When a firm expands by combining with

an existing business in the same industry, but at a different
stage of production”.
For example: Mcdonald's purchase the production of the

meat processing factories and or the farms themselves!

ADVANTAGES OF DISADVANTAGES OF
VERTICAL INTEGRATION VERTICAL INTEGRATION
You control the quality and Will increase costs in the short
delivery of materials, which has run.
obvious benefits.
Requires careful management.
Reduce problems with supply.
Have to become an expert in
Reduce your costs through the
the new business quickly.
supply chain and increase profit.

ACTIVITY: try to answer these questions based on your

new(ish) knowledge….
a) Why would Mcdonalds (in the tertiary sector) purchase

a meat production factory and a farm of cows?
b) What could be the benefits?
c) Do you see any potential drawbacks to this strategy of
vertical integration?

L6 (1.3) Enterprise, growth and size: Diversification
QUESTION: If you had $100,000 dollars….’would you

invest it in a single business that your friend had told you
was destined to succeed’
OR
‘Instead would you invest $25,000 into four different

business opportunities’!
DISCUSS this puzzle and give a justification

QUESTION: Fort those that answered a) this means you are

a significant risk taker. For those that answered b) this is
‘diversification’ or ‘conglomerate’ growth.
The principal is that your business involves itself in different

areas of business or different industries or sectors.
QUESTION: Why might this be beneficial?

Here are three examples of conglomerates

(businesses that grew through diversification)
The Walt Disney Company
Google: Not Just a Search Company
Samsung: It's Everywhere.

L6 (1.3) Enterprise, growth and size: Diversification II
ADVANTAGES OF
ACTIVITY:
DIVERSIFICATION OR
GROWING INTO A
CONGLOMERATE Choose one of the three
conglomerates and
- research to find out what
Spread risks
different businesses they
- Obtain revenue streams
own or what different
from other markets
- streams of income they
Increase the range of
have from being a
products they sell /
conglomerate.
services they offer

L6 (1.3) Enterprise, growth and size: Growth Questions
EXTENSION QUESTIONS:
-State one reason an entrepreneur may wish to remain

small(ish).
-Define Economies of Scale and explain the reason for the U
shaped curve.
-What is market share?
-What is a benefit of economies of scale?
-What is a drawback of increasing market share?
-Explain a possible drawback of increasing in size rapidly.
-How could business reduce risks by diversification?

L1 (1:4) Business Organisations: Sole Trader
1. Discuss what a sole trader is

and be able to define it.
Learning 2. Outline the liability of a Sole

Objectives Trader.
3. Know and understand the

impact of unlimited liability
for the sole trader.

There are several different types of business ownership.
You will find out that…. depending on the type of

ownership... the owners have different responsibilities
and involvement in a business.

As a sole trader, you run your own business as an individual and have full
control of what goes on in your business. You can, however, employ staff
to work with you but you have the ultimate say of what goes on!
You will have a responsibility to send a self assessment tax return each
year to let the HMRC know how much income tax you have to pay on
your profits. You will also have to arrange to pay national insurance
contributions. If you expect to earn £83,000 or more a year then you will
have to register as VAT registered with HM Revenue and Customs
(HMRC). Financial details will be kept private to avoid to competitors.

Examples of sole traders can include hairdressers, plumbers and

photographers, electrician, window cleaners et al.
You will only need a small amount of capital (which reduces the
initial start-up cost). The wage bill will be low (as there are few or no
employees). You can make the decisions without consulting anyone
else!
The drawbacks might include……..

There are two different types of liability protection for businesses. These are
different legal structures.
UNLIMITED LIABILITY
The owners are personally responsible for all debts, even if this means selling
personal possessions. If they can’t pay for debts then they may have to be
declared bankrupt. They may lose their personal possessions!
LIMITED LIABILITY
The owners are only responsible for debts up to the amount they invested in the
business. For example if the owners invested £20,000 then they will only be
liable for this amount.

Level 3-4 Explain what is meant by a sole trader giving at least three
examples.
Level 5-6 List the advantages and disadvantages of trading as a sole

What trader. Explain what is meant by liability and identify the
type that a sole trader has.
grade do
you Level 7-8 Discuss what impact the type of liability has on the sole
trader. Analyse what start-up costs are involved.
want?
Investigate other methods of financial help that sole
Level 9 traders are eligible for in the area that you live!

EXTENSION TASK: Create an information leaflet to help if

a sole trader would be the best option for someone starting
their own business.

EXTENSION TASK: Consider the John Costs ($) Sue Costs ($)
two photographers costs. John
rents a studio and bought all new
equipment. Sue works from home Studio Rent $1000/pcm Camera $350
and bought all second hand
equipment.
a) What are their total costs Insurance $1250/pa Lenses $450
(pa) respectively?
b) Are any costs missing? Nikon D4 $4000 Lighting $500
c) What’s the difference in Camera
cost structure?
d) Which photographer has
the highest risk? Lenses $2000 Insurance $800/pa
e) Which do you think is the
most sensible cost Lighting $1000 Travel $250/pcm
structure? Debate both
approaches to being a sole Tripod $140 Tripod $90
trader.

L2 (1:4) Business Organisations: Partnerships
To define what is meant by a business partnership.
To understand who owns, manages and shares the

Learning profits in a business partnership.
Objectives To investigate a Deed of Partnership.

Consider this Consider this……

statement in
Why might somebody want a business partner?
relation to
Partnerships: Can you think of any obvious advantages or disadvantages?
‘The sum of the
whole is worth
more than the
parts’

A group of people (often with similar interests)

who come together to share the workload and
responsibility of running a business.
Minimum 2 – Maximum 20
Doctors - Lawyers - Dentists - Accountants -

Vets

Characteristics of a
partnership agreement

Each partner is responsible for the entire debt of the
partnership, so if one partner makes a bad decision
then it has to be met by all of the partners.
UNLIMITED LIABILITY

Unless otherwise stated in the ‘Deed of partnership’ these

are fair assumptions to make!

Why Partnerships? Often to expand the business by an increase
in capital or to gain specialist skills that are required for the
business to develop.
Who owns a partnership? The business is owned by the partners

equally (e.g. 3 partners each own a third of the business). Unless
it is stated otherwise in the Deed of Partnership (DOP).
Who manages the business? The partners share control of the

business equally (unless stated in the D of P). In some
partnerships each partner may run a separate department.

Deed of Partnership: What’s included?
1. How profits and losses are to be shared.

2. How much money each partner has put into the business
3. How much each partner gets paid – “salary.”
4. The working arrangements of the partnership e.g. who has
responsibility for which part of the business
5. Arrangements for removing a partner or adding a partner to a
business.
6. Arrangements for ending the partnership and the dividing up
the assets once the partnership is dissolved

•This legal Partnership is between:______ & _______
•The name of the Business will be:________________
•The Business activities are: ____________________
•Each Partner agrees to provide the sum of: £_ _ _._ _
•The duties of the partners will be as follows:________
•The bank account will be in the name(s) of:____ & _____
•Profits will be shared out:______________
•Wages paid will be:________________
•Regular Meetings:______________
•Overall Decisions on business:_______________
•Leaving the Partnership:________________
•Signed: ________ & __________ Dated: ______
•Witnessed: _____________

• Simple to set up.
• Business can gain expert help by taking on a • Unlimited liability for the debts of the
qualified partner. business!
• New Partners - New Ideas • Finance or capital is still limited to what the
partners can invest
• Extra partners bring extra capital!
• Lack of continuity
• Responsibility for running the business (both • No consultation required (Deeds of
decision making and workload) is shared. Partnership are only recommended)
• Finances are kept private • Decision making more complex and can
become political.
•Division of labour leads to greater expertise.

L3 (1:4) Business Organisations: Limited Companies
● Define liability.
● Understand the difference in
Learning liability limited liability.
Objectives ● Associate the type of
liability with the different
structure of business.

Consider: Find the definition of ‘liable’.
If you are ‘liable’ for something what does that mean?
Consider: What do you think the main differences might be

between a Sole Trader and Limited company?

Answer: “The state of being legally responsible for

something”.
If you are liable for something, you are responsible for it.
Borrow a laptop from school (for example) and you are

liable!

Liability is how personally responsible you are for the

debt of your business.
One is not personally responsible if the business is a

separate legal entity to the owner.

UNLIMITED LIABILITY: is where the owner is 100%

personally responsible for the debt of their business!
Their responsibility is unlimited
If you have unlimited liability and your business goes into debt
and doesn’t make enough revenue to repay that debt then you
could lose your personal assets in order repay the debt.

Assets are a ‘thing’ of value and tend to appreciate

in value. Assets include a house, car, valuables,
land, factory and machinery.

L4 (1:4) Business Organisations: Research Lesson
ACTIVITY: You will research investigate the concept of assets and present it using a report or presentation.
1. Defines assets using the internet or book to help you.

2. Create a list of assets and describe why economic agents buy them or ‘hold them;.
3. Pick a range of these assets and use the internet to look at how their prices have risen and fallen over time. You
can display your results in graph format with labelled axis and title.
4. What conclusions can you draw? Comment on which is the best asset to own, buy or invest in. Mention risk
and their historical movement.
5. Use images, page numbers and a formal style.
L5 (1:4) Business Organisations: Limited Companies II
Limited liability is where the owner is only responsible for

the money they have invested in the business
Therefore they will only lose money that they have

invested into the business, they can’t lose any personal
assets, like house, car or land.
This is less risky!

● Limited companies are owned by their shareholders and run by

directors.
● The shareholders appoint the directors (who are in some cases
the same people) who run the company in the interest of the
shareholders.
● Shareholders own a share of the company, but they do not own
the assets of the company and they are not liable for the debts of
the company.
● The business is a separate legal entity and can be sued in its
own right.

The most common form of limited company is a private limited company

(Ltd). Private means that the shares of the company are not traded publicly on a
stock exchange.

By contrast, a public limited company (Plc) tends to

have a larger value of share capital invested and its
shares may be traded publicly. It is rare for a start-up to
be a plc.

ACTIVITY: Summarise the terms ‘limited liability’ and

‘unlimited liability’ into one paragraph in your book.
Why do you think a Private Limited Company (Ltd) might

wish to become a Public Limited Company (Plc)?
Extension: Have a look for other ‘assets’ not included above.

Extension: Why do you think assets tend to rise in value
over time?

Unlimited Limited
Sole Trader
Partnership
Private Limited
Company
Public Limited
Company
Franchise

Unlimited Limited
Sole Trader YES
Partnership YES
Private Limited YES

Company
Public Limited YES

Company
Franchise YES YES

Gary Thompson set up a tanning salon Leon Allen set up an aquamarine store as a
as a sole trader in 2008, but became a sole trader in 2009. In 2015 sales of pet
private limited company in 2013 when fish dipped, leaving Leon bankrupt and
he asked friends and family to buy owing his debtors money.
shares in his business so that he could
expand. In 2015 Britain had a heat
wave so tanning become unnecessary,
leaving Gary bankrupt and owing his Task: Explain the consequences of going
debtors money. bankrupt for each entrepreneur.
Extension: Why are the consequences
different? How could Leon’s consequences
have been avoided?

L6 (1:4) Business Organisations: Franchises
“A franchise is a marketing arrangement

allowing another business to trade in the
same style as an existing business.”

An established business (the franchisor) offers for sale to

other businesses or individuals (the franchisee) the rights to
use its products, services or logos (usually in a specific
geographical area).
Usually there is:
– An initial set up fee (can be costly)

– A % of sales turnover is paid annually (royalty)

• Franchisor – The person or business who offers to

franchise to other businesses its trading methods,
products and business logos
• Franchisee – A person or business buying the franchise
• Royalty – A payment made to the franchisor based on the

sales turnover of the franchise

Assessing a franchise opportunity. What to consider?
• Location of the franchise

• Successes of other franchises
• What the business is / how it operates
• Competition in same market sector
• How long the franchisor has been in business – and
how financially secure it is

L6 (1:4) Business Organisations: Franchises Research
What do you get from the Franchisor?
1. Training and support offered.
2. Conditions and restrictions (I.e. how long is agreement,

how it is run)
3. Initial and ongoing costs – I.e. McDonalds initial cost is

between £150,000 and £500,000
2018 - 2019 Cambridge Course 0450 H. Gilur 2017

ACTIVITY: In groups of 2-3
1. Choose a Franchise, of which you are the franchisor

2. On sugar paper design an advert for a business magazine
to attract new franchisees.
3. You must say
○ What type of person you think it will suit.
○ Describe what responsibilities they will have.
○ What support and help you can offer them.
○ Any additional information you think is useful.

L6 (1:4) Business Organisations: Franchises Research
Activity: Using your new knowledge, you will write an advisory

report to the following question from a business colleague of yours,
“I am looking at starting a franchise of subway, the cost is

$50,000 and the royalties are 20% of sales per year. The
location is _ _ _ _ _ _ _ _ _ _ _ _. With your
knowledge...what do you recommend? Do you think it will
succeed”?
Using your new knowledge, terminology and understanding, try to

evaluate the offer of a new franchise. You can use some ‘what if’
scenarios to demonstrate how much money he could make.

ACTIVITY: In groups of 2-3
1. Choose a Franchise, of which you are the franchisor

2. On sugar paper design an advert for a business magazine
to attract new franchisees.
3. You must say
○ What type of person you think it will suit.
○ Describe what responsibilities they will have.
○ What support and help you can offer them.
○ Any additional information you think is useful.

L7 (1:4) Business Organisations: Joint Ventures
● To be able to define a Joint Venture.

● To be able to understand the need to create a
Learning joint venture.
● To give an example and consider the likely
Objectives success of a joint venture.

A Joint Venture is an agreed merger between

two businesses for example, Walmart and Bharti.
The concept is to share, risks, capital and

profits.
They are not always successful!

Real life examples of a joint venture
Example 1
Another example of a joint venture is the joint venture between the taxi giant
UBER and the heavy vehicle manufacturer Volvo. The joint venture goal
was to produce driverless cars The ratio of the ownership is 50%-50%. The
business worth was $350 million as per the agreement in the joint venture.
Example 1
Sony and Ericson’s example is also a good example of Joint Venture as

they joined hands to manufacture smartphones and gadgets. After several
operating years, Sony eventually acquired Ericsson mobile manufacturing
division.

Example 1 (UBER and Volvo: Driverless car)
CONSIDER: What did each hope to get out of the

agreement?
Example 2 (Sony and Ericsson)
CONSIDER: Can you see any possible risk in entering a

joint venture in this case?

•If a project is successful, then profit has

• Sharing costs to be shared between two companies.
• Sharing risks of failure or new
• Disagreements over important
markets decisions might occur.
• Sharing the cost (can be large on
new large scale projects) • Clash of cultures between the two
companies could result.
• Enter new markets where
Company A has no market • If one company has financial difficulties
knowledge. or the venture may have to be dissolved,
leading to losses.

Grade Grade Answer the following questions, according to what grade

Number (International) you are targeting
8-9 A* Comment on the risk and whether the opportunity may be greater
for one of the two businesses in a joint venture. Explain why.
7 A Using your example, assess whether you think it will be successful,

weighing up the strengths and weaknesses.
6 B Give an example of a joint venture and indicate why they have

formed a joint venture.
4 C Identify strengths and weaknesses of a joint venture.
3 D Define a joint venture.

L8 (1:4) Business Organisations: Public Sector Organisations
1. To understand the difference between

public and private sectors of the
economy.
2. To be able to place different

Learning organisations into either Public or
private respectively.
Objectives
3. To know the source of funding of the
Public Sector.
4. To be able to make an informed

comment upon the use & possible
efficiency of the public sector.

CONSIDER THESE STARTER

QUESTIONS
1. What does the graph show you?
2. What doe public sector employment mean?
3. What is included under the heading ‘public

sector; in terms of jobs?
4. If the population of the UK is 60m people

(roughly)....how many work in the Public
Sector?
5. If the GDP of Norway is $400b, how much

cash is spent on Public services annually?

The ‘Public sector’ is an important employer in all mixed economies.
Public sector refers to all businesses owned by the state (Government) and local
Government.
“That part of the economy owned by the state”
Public corporations are wholly owned by the state or central Government.
They are usually businesses which have been 'nationalised' (meaning they were
once owned by an individual but bought later by the Government).
Common examples include, water and railways.

The Government does not run these businesses directly!
Instead it appoints a Board of Directors who are responsible for the

running.
The Government will make clear what the objectives are.
Often the objectives are NOT pure profit! What do you think they
may be instead?

There are no shareholders to insist on profit and efficiency. This
Some industries are thought to be too important to be may lead to a Government business being run inefficiently or
poorly!
privatised (not Government owned) water and energy
generation are common! Government may subsidise (or help financially). This can
encourage inefficiency and mean the business is supported in
Natural monopolies are often owned by the Government so a) failing or being badly run! This can be seen as a poor use of
the customer is not exploited by high prices and b) it would be government revenue which comes from taxing individuals.
wasteful to have two sets of certain things like railway lines in
the private sector! No competition (or a lack of competition) gives no incentive to
run efficiently.
If the Government owns the businesses it can protect it from
failure. This secures jobs in an economy. Governments can use the businesses as a political tool. For
example, prior to an election, create more jobs to boost their
TV is often state owned. This means that (in theory) important popularity!
programmes can be made, which may not be profitable, but All these elements lead to inefficiency!
still valuable.

Grade Grade Answer the questions according to your desired grade
8-9 A* Discuss whether you think the Government should be indirectly running large
business and whether you think it will be efficient and with a high level of service.
7 A Who runs public sector businesses, state their likely objective and why these
may be very different from a private sector business.
6 B Explain the term nationalisation and explain why the Government bought back
certain businesses.
4 C Give an indication of what businesses are commonly within the public sector.
3 D Define the ‘public sector’.

L1 (1:5) Business Organisations: Objectives
1. Understand the need to set an

objective.
Learning 2. To be able to define and give

examples of objectives.
Objectives
3. To select appropriate objectives
for different organisations such
as a Sole Trader of PLC.

CONSIDER THESE STARTER QUESTIONS:
What’s the objective of a Year 12 student?
What is the objective of President Abdel Fatta El Sisi?
What’s the objective of the Body Shop?
What’s the objective of a homeless individual living on the streets?
Is the following a good target? ‘I want to be the best teacher in the

World’! Discuss

Question:
Could Kipchoge have

broken the historic 2
hour barrier if he had
no set it as a target?
How could targets have

helped in this case?

Organisations set objectives so that:
Objectives are good to work towards. They

motivate people.
Objectives help focus decision making towards

hitting targets.
Anybody can compare outcomes against

objectives.

ACTIVITY: Write down any objectives you can think of!
Here are some companies to give a clue and get your mind
thinking!
1. The Body Shop

2. The WWF
3. Coca Cola
4. Apple
5. Bob’s window cleaning service (a brand new business)

L1 (1:5) Business Organisations: 6 Common Objectives
Objectives Activity (In groups of 3)
1 - Survival 1. Choose two objectives each.

2 - Market Share 2. Make notes, read and understand
3 - Profit each one (10 minutes).
4 - Growth of 3. Find an example of a business who
business you think displays your two
5 - Service to objectives.
community 4. Willing volunteers talk from the
6 - Return to front about their research, allowing
shareholders students to make notes.

L1 (1:5) Business Organisations: Objectives can change!
Sometimes objectives change! Here are three reasons:
1. A business that has survived for three years now wants to focus
on profit!
2. A business that has achieved a larger market share now wants to

increase its profit or return to shareholder.
3. An economic recession like that of 2008 hits and businesses are

forced to focus once again on survival.

L1 (1:5) Business Organisations: Objectives Questions
Number Grade Answer the following questions, according to the grade you want
8-9 A* Explain in detail why Government owned business will set different objectives.
Explain how social enterprise may have a profit motive as a means of helping
society. Outline how economic conditions might influence objectives.
7 A Detail why some businesses may set more than one objective, but will also be
ready to change objectives if a situation changes.
6 B Explain why most business focus on profit, though not exclusively.
4 C State why business objectives are useful in your own words
3 D State a range of common business objectives

L2 (1:5) Business Organisations: Social Enterprise
1. Define and identify examples of
social enterprise.
2. Explain the criteria to be classed as
a social enterprise.
3. Analyse the advantages and
Learning disadvantages of being a social
enterprise.
Objectives 4. Evaluate the differences between a
social enterprise and a charity.

Consider this: Watch the following video and

make notes on anything unusual or that you did
not know about Social Enterprise!
https://www.youtube.com/watch?v=ZJFX2cXjIQU

What is social enterprise?

The term, ‘Social Enterprise’ from recognition that there were
organisations using the power of business to bring about
social and environmental change.
Defined
“A social enterprise is an organization that applies
commercial strategies to maximize improvements in
financial, social and environmental well-being—this may
include earning profits for external shareholders.”

To qualify as a social enterprise the business should:
1. Have a clear social and/or environmental mission set

out.
2. Generate the majority of their income through selling.
3. Reinvest the majority of their profits (to make their
business bigger,better and help their social aim).
4. Be autonomous from Government (independent).
5. Be majority controlled in the interests of the social mission
6. Be accountable and transparent (publish their accounts
and show where the money is going).

ACTIVITY: To what extent do these two business qualify as a ‘Social

Enterprise’? Watch the videos of The big Issue and Divine Chocolate,
choose one company and start evaluating it using the criteria from the
previous slide. Make detailed notes.

POSITIVES / ADVANTAGES NEGATIVES / DISADVANTAGES
Provides an opportunity for local people to Have to compete in the commercial market
gain employment. and may not succeed.
Brings about a positive change to people and Face the same challenges and risks common
communities. to all businesses who make more profit than
them!
Social benefits – provides facilities to
disadvantaged people. Having the necessary resources can be
difficult as they reinvest profit!
Develops a sense of community.

L2 (1:5) Business Organisations: Social Enterprise Questions
Number Grade Answer the following questions, according to the grade you want
8-9 A* State your opinion on whether or not you think social enterprises should be
allowed to make profit. Does this not detract from their social goals?
7 A Evaluate the strength of the business model, using the criteria, advantages
and disadvantages to say whether or not social enterprise can compete
against regular business driven by pure profit.
6 B Explain how a social enterprise is different from a charity.
4 C What are the goals of a social enterprise?
3 D Define a social enterprise.

L3 (1:5) Business Organisations: Stakeholders
1. To know and define the term,

‘Stakeholders’.
2. To understand the different
Learning roles stakeholders have in a
business.
Objectives 3. Identify and understand why
there are a large number of
stakeholders for any given
organisation.

CONSIDER these questions amongst your peers:
1. What are Stakeholders?
2. Are they the same as shareholders?
3. Are all stakeholders also shareholders?

DEFINITION:
“Stakeholders are any person or groups of

people who have an interest in a business”
ACTIVITY:
Using the school...draw a stakeholder diagram

with as many different stakeholder groups as
you can think of. Work in pairs. 3 minutes.

A basic Stakeholder diagram showing the

main groups that would apply to a school.
Consider: Can they be prioritized? Is

there an order of importance?

ACTIVITY: Now we have a

definition of Stakeholders….
Discuss with your peer and

decide why they have an
interest in the school or a
business of your choice (5
minutes).
Draw the table and fill in the

elements that you can.
Add rows to the table if you

can think of other stakeholders
that are missing.

Stakeholders can be split into further groups, Internal and External
It is the Managers responsibility to manage the Internal Stakeholder demands on a day to

day basis.
However, s/he must also manage the wants and needs of the External Stakeholders also.
Increasingly the media play a large part in shaping how people view big Business. This
means it is crucial to present the best face of the business to the media using positive
PUBLIC RELATIONS (PR)
ACTIVITY:
1. Draw a table and split the Stakeholders into INTERNAL AND EXTERNAL.
2. Use the internet to help you generate the biggest list you can. Obviously the biggest
the business, the larger the list of stakeholders.
3. Consider, who might be added to the Stakeholder list for Multinationals like Shell.

Does your diagram look anything

like this?
Did you manage to find any, not on

the diagram to the right?

ACTIVITY: This is for students wishing to explore the

topic further and push for an A*. The article talks about
the rise of importance of the ‘Stakeholder Model’.
Read the article by clicking on the picture or the link in

red!
1. What are the changes?

2. Who supports them?
3. Who did the old shareholder value primarily?
4. Who is of interest now?
5. Why do you think this change has occurred?

L4 (1:5) Business Organisations: Stakeholder Conflict
Know and understand that a large

number of stakeholders are
involved in businesses.
Learning
Objectives Be able to explain a stakeholder
conflict with reference to two or
more particular groups.

Stakeholder conflict: arises from trying to satisfy the needs of

Business and their owners.
Consider an oil producer who wants to pipe oil across another

country and a sea!
On the face of it...this is fairly standard. However, it does create

stakeholder conflicts!
ACTIVITY: List some of the stakeholders involved and state their

interest in the operation above.

Stakeholder conflict II
1. Business owner versus the environmental groups!

Workers for the business versus the owners profit motive
2. The buyers of oil want cheap oil, but don’t want to be
associated with purchasing oil from a company who don’t
respect the environment.
3. The bank wants their loan repaid and encourages the business to
make maximum profits (regardless of the environmental
impact).

ACTIVITY
1. Choose one of the conflicts from above and write out how you think it
can be resolved. Advanced learners will look for a real life example.
2. Imagine your school. How do you think the school could respond to
local residents who complain of noise from the school twice a day?
3. Find your own example of a stakeholder conflict that exists within
business and describe the situation. Come up with your own solution
that you think would please both parties.
4. Imagine Heathrow propose a 6th terminal! Which stakeholders would
be most upset by this proposal. List them and explain why!

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IGCSE Business Studies

2020 - 2022 Course Cambridge H. Gilmour

Unit 1: 2: Classification of Business

Understanding 3: Enterprise, Growth and Size

Business Activity 4: Types of Business

5: Business objectives and

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

1. Think about what makes a good

Learning 2. Get familiar with the idea of

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

Consider this: Here are four products (the

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

10 MINUTE ACTIVITY (GROUPS): You will be given a

a) Can they be successful?

1. Boggles (goggles for dogs 4.) Fishless aquarium

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

1. Boggles for dogs is a pair of glasses for dogs!

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

ACTIVITY REVIEW: These are all actual products that were a

The single item that was unsuccessful was, ‘Obama on a stone’!

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

ACTIVITY: In pairs...you have been tasked with selling an item.

Confident salespeople will be asked to present (pitch) their

The investors (class) will decide on a winner. That honor will

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

7 A How can a recession affect a product? Which products might be more

6 B What is a market segment? Give an example of a product that fits a particular

4 C What is the difference between a product and a service?

3 D Give an example of a product for a mass market.

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

1. To be able to define a need and a

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

a) What do you think are your fundamental needs in life?

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

Consider: What could these two images represent? Write down

Trainers versus dinner for two

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

2018 - 2019 Cambridge Course 0450 H. Gilmour 2017

EXAMPLES OF ‘OPPORTUNITY COST’

ACTIVITY: What could be the opportunity cost of the following?

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

The Opportunity Cost is

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

Production of any good or service requires resources or Factors of Production. These

Capital: manufactured resources in the production process (such as machinery, tools,

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

What do you need for a can of Cola in terms of FOP (L,L,C,E)

Capital: machinery, tools, a factory building and trucks.

Enterprise: skills to organise production and motivate workers.

Labour: all of the jobs + manpower needed at the factories.

Land: the natural resources (such as sugar, water and caffeine).

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

ACTIVITY: Which order of L, L, C & E (from largest to smallest)

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

6 B Define opportunity cost and give a real life example.

4 C Define needs and wants

3 D List the four factors of production.

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

1. Be able to define Specialisation

2020 - 2022 Cambridge Course 0450 H. Gilmour 2020

Consider: How many of these jobs can you master in a lifetime?

Write down any difficulties in becoming any of the above!