IGCSE CIE Business studies

• Businesses thrive when they are able to meet customer needs and wants
• • Needs are considered to be essential e.g. shelter or food
• Wants are desires which are non essential, even if consumers consider them to be essential e.g Nike trainers
• the economic problem


  Due to the problem of scarcity, choices have to be made by producers, consumers, workers and governments about the best (most efficient) use of these resources.
• These resources are known as the factors of production and are land, labour, capital and Enterprise
• Opportunity cost is the loss of the next best alternative when making a decision
• Specialisation occurs when people and workers focus on one particular role or task and thereby gain significant skill in doing it
• Division of labour is the separation of a work process into a number of tasks that are completed by a separate person or group of persons
• specialisation effects

  • Specialisation results in higher output per worker which increases productivity
  • Specialisation is now more common due to specialised technology, machinery and increasing global competition 
• Where does specialisation occur


  on an individual level

  on a business level

  on a regional level

  on a global level
• • The purpose of business activity can be broadly defined as the activities that businesses engage in to produce goods or services that meet customer needs while adding value
• The primary purpose of business activity is to produce goods or services that satisfy a need or demand in the market
• Goods are physical products
• Services are non-physical items
• • The ultimate goal is to create products that meet the needs and preferences of customers and provide value to them
• • By meeting customer needs, businesses can build customer loyalty, increase brand awareness, and generate revenue
• Value-added features can differentiate products from competitors, create a unique selling point, and increase customer satisfaction
• Adding value is the process of taking raw materials and using them in such a way that the end product created is worth more than the cost of the raw materials used to create it - value has been added
• The added value is the difference between the price that is charged to the customer and the cost of inputs required to create the product or service
• • If value is not added to the materials and components that a business buys then fixed costs cannot be paid and no profit will be made
• Ways to add value

  Convenience

  Branding

  Quality

  Design

  USP
• Product and marketing teams will constantly explore ways in which to increase the added value
• The greater the added the value the more successful the business is likely to be and the higher their profits
• • Businesses can be classified according to the type of business sector in which they operate 
• Classification into these sectors is a simplified way of categorising industries
• What does classification do

  • It helps to provide a means of making comparisons between firms in the same sector
  • It does not capture the full complexity and interconnectedness of the business world
  • Many businesses operate across multiple sectors or may not fit neatly into a single category
• The primary sector is concerned with the extraction of raw materials
• The secondary sector is concerned with the processing of raw materials
• The tertiary sector is concerned with the provision of a wide range services for consumers and other businesses
• The three sectors are linked in the chain of production which is the series of steps taken to turn raw materials into a finished product that can be marketed and sold