IGCSE

BUSINESS
STUDIES
Section 1:
Understanding
business activity
Welcome to Grade 10 to the Business
studies lesson!

This is what I expect from you.

 Bring your Textbook & Revision Guide and your big

pink copy book for all our lessons.

 For each lesson you will write in your copy book the

following at the beginning of the lesson.

 Date
 Topic
 Lesson objectives

 There will be activities to be done online for each lesson.

These activities will be attached to the Lesson as Quizzes

or assignments in Moodle.
 Make sure you do the activities within the given timeframe.
 Syllabus overview
You will gain lifelong skills, including:
• the ability to calculate and interpret business data
• communication skills needed to support arguments with
reasons
• the ability to analyse business situations and reach
decisions or judgements.

Paper 1: Data response (1 hour 30 minutes)

 Four data response questions based on four different

businesses.
 The questions are structured a) to e)

Paper 2: Case study (1 hour 30 minutes)

 Four structures questions all based on a case study
Your books
Section 1: Understanding business
activity

This section introduces the underlying ideas and

concepts of business and includes the purpose
and nature of business activity and how
businesses can be classified.
Subtopics:
1. Business activity

2. Classification of businesses

3. Enterprise, business growth and size

4. Types of business organisation

5. Business Objectives and stakeholder objectives

6. Case Study
Week 1 Lesson 1
Topic: Business Activity (Pgs 2- 10)

Objective

Demonstrate an understanding the

purpose and nature of business activity.
1.1 Business Activity
 Businesses are all around us. The food we
eat, the clothes we wear, the bus that
brings you to school & the books we use
are made by businesses.
 Business Studies is “the study of
economics and management”.
 Business Studies is concerned about how
individuals and groups of people organise
themselves, plan and act to create goods
and services to satisfy customers.
Businesses in Khartoum
The Economic Problem

 Need: a good or service essential for living. Examples

include water and food and shelter. Add examples of
your own.
 Want: a good or service that people would like to
have, but is not essential for living. Examples include
cars and watching movies. Add examples of your own.
 Scarcity is the basic economic problem.
 Scarcity occurs when there are unlimited wants
and limited resources to produce the goods and
services to satisfy those wants. For example, we have
a limited amount of money but there are a lot of things
we would like to buy, using the money.
Needs vs wants
Look at the pictures and compare with your own list of needs and wants
 Opportunity cost

 Opportunity cost is the next best alternative forgone

by choosing another item.
 Due to scarcity, people are often forced to make
choices. When choices are made it leads to an
opportunity cost
 SCARCITY → CHOICE → OPPORTUNITY COST
 Example: the government has a limited amount of
money (scarcity) and must decide on whether to use it
to build a road, or construct a hospital (choice). The
government chooses to construct the hospital instead
of the road. The opportunity cost here are the benefits
from the road that they have sacrificed (opportunity
cost).
The economic problem
The fundamental economic problem is the
issue of scarcity and how best to produce
and distribute these scare resources.
 Factors of Production

 Factors of Production are resources required to produce

goods or services. They are classified into four categories.
1. Land: the natural resources that can be obtained from
nature. This includes minerals, forests, oil and gas. The
reward for land is rent.
2. Labour: the physical and mental efforts put in by the
workers in the production process. The reward for labour is
wage/salary.
3. Capital: the finance, machinery and equipment needed for
the production of goods and services. The reward for capital
is interest received on the capital.
4. Enterprise: the risk taking ability of the person who brings
the other factors of production together to produce a good or
service. The reward for enterprise is profit from the business.
 Specialization

Specialization occurs when a person or organisation

concentrates on a task at which they are best at.
 Instead of everyone doing every job, the tasks are divided

among people who are skilled and efficient at them.

Advantages:
 Workers are trained to do a particular task to their best therefore

increasing efficiency
 Saves time and energy: production is faster by specialising

 Quicker to train labourers: workers only concentrate on a

task, they do not have to be trained in all aspects of the

production process.
 Skill development: workers can develop their skills as they do

the same tasks repeatedly, mastering it.

Disadvantages of specialisation:

 It can get monotonous/boring for workers,

doing the same tasks repeatedly.
 Higher labour turnover as the workers
may demand for higher salaries and
company is unable to keep up with their
demands.
 Over-dependency: if worker(s) responsible
for a particular task is absent, the entire
production process may halt since nobody
else may be able to do the task.
Purpose of Business Activity

 Business is any organization that

uses all the factors of production
(resources) to create goods and
services to satisfy human wants and
needs.
 Businesses attempt to solve the problem
of scarcity, using scarce resources, to
produce and sell those goods and
services that consumers need and want.
 Added Value

 Added value is the difference between the cost of

materials bought in and the selling price of the
product.
 Which is, the amount of value the business has added to the
raw materials by turning it into finished products.
 Every business wants to add value to their products so they
may charge a higher price for their products and gain more
profits.
 For example, logs of wood may not appeal to us as
consumers and so we won’t buy it or would pay a low price
for it. But when a carpenter can use these logs to transform
it into a chair we can use, we will buy it at a higher cost
because the carpenter has added value to those logs of
wood.
 How to increase added value?

 Reducing the cost of production. Added value of

a product is its price less the cost of production.
Reducing cost of production will increase the added
value.
 Raising prices. By increasing prices the added value
can increase,
 But there will be problems that rise from both these
measures.
 To lower cost of production, cheap labour, raw materials
etc. may have to be used, which will create poor quality
products lowering the value of the product. People may
not buy it. And
 When prices are raised, the high price may result in
customer loss, as they will turn to cheaper products.
In a practical sense, you can add value by:

 Branding
 Adding special features

 Provide premium services etc.

In a practical example, how would you add value to a

jewellery store?
 Design an attractive package to put the jewellery items in.

 An attractive shop-window-display.

 Well-dressed and knowledgeable shop assistants.

 All of this will help the jewellery store to raise prices

above the additional costs involved.

Think of another example of your own write down
how value can be added.
Plenary

 What is the difference between wants

and needs?
 How can businesses increase added
value?
 Answer Week 1 Lesson 1 Activity online
 Next topic: Classification of Businesses