IGCSE Business Studies
What is a business?
Learning Outcomes
• Understand the purpose of business activity
• Understand the concepts of needs, wants
and scarcity
• Be able to name the four factors of
production
• Understand the concept of adding value
In Pairs
• Can you come up with a definition for the
term ‘business’ (No Googling!)
• Add your definition to the Google Doc
60 Second Video – Business in a
Nutshell
What Is a Business?
A business can be defined as an organisation
that provides goods and services to others
who want or need them
What Does a Business Do?
Processes
INPUTS
OUTPUTS
The Business
The overall aim of most businesses is to spend less on
their inputs than they earn from their outputs and
make a PROFIT
Homework Questions Review
NEEDS AND WANTS
• What needs do the two families have in
common?
• What do you think are the likely wants of each
family? Is there a difference?
• What is the difference between a need and a
want?
• Can all of a person’s wants ever be satisfied?
• What does the word ‘Scarcity’ mean?
• What determines a person’s wants?
Key Points……
• Needs are the things we need to survive
• Wants are UNLIMITED
• Businesses meet these needs by producing
goods and services
• Businesses can also try to create wants
This is called…..
The Basic Economic Problem
Human wants are unlimited but resources are limited
BUSINESS OUTPUTS –
GOODS AND SERVICES
Goods and Services…
• What is the difference between a good and a
service?
Goods
• Goods are physical objects that can be
used or consumed
Services
• Services are non tangible
The Goods Service Continuum
• What does this diagram show?
• Where would a ‘Big Mac’ fit on this spectrum?
• Write a product on your post-it note and place it on
the scale
BUSINESS INPUTS – THE
FACTORS OF PRODUCTION
The Factors of Production
• Factors of production are the INPUTS that a
business uses to produce their goods and
services
Task
• Write a list of all of the inputs that go into
producing …….
Task
• Watch the video… Snickers Unwrapped.
• Can you now add anything to your list
Land
Capital
Good or
Service
Labour
Enterprise
Which Factors?
• Of the inputs for Snickers….. Which factors
of production do they represent?
• Can you add any more to your list?
Task
Using the template
Choose a product
Make a diagram to show the different inputs
that it requires. Include some images.
Split into the 4 different factors of production
Labour
Land
Product
L
Capital
Enterprise
ADDING VALUE…….
Adding value means creating something that
has a higher value to customers than the
bought in value
Added value The difference between the
Selling Price and Costs of Production
Calculating Added Value
Added Value
Selling Price
Costs
(Direct)
For example
Selling price
Of finished
Product
TABLE
=
$200
ADDED
VALUE
Of
?
-
=
Material
And costs
=
$80
Example – iPhone 4s
Here are the estimated
costs of making an iPhone
4s 16GB. It retails at £399
1.How much value has
Apple added?
The 32GB model will cost
an extra £2 to produce,
but will sell for £499.
2. How much value has
been added?
Task – 5 mins
(be ready to justify your answers)
RANK THESE THINGS
FROM HIGHEST TO
LOWEST VALUE ADDED
Increasing Added Value
Added Value
Selling Price
Costs
(Direct)
What ways are there to add value?
•Decrease Costs
•Increase Selling Price
Will these methods always work? What could
go wrong?
Key Points on Adding Value
• Any cost cutting – must not lead to
consumers being prepared to pay less
• When increasing the selling price –
Usually the product must be changed
to justify the increase in price
• The extra costs incurred adapting the
product must lead to a larger increase
in the selling price customers are
prepared to pay
Task – Team Challenge
• In groups you are going to be given
an item
• You have to think of as many ways to
add value as you can.
• You can alter the product or add
different materials as long as you
think this will make customers
prepared to pay more
• You will present your ideas to the
rest of the class.
• You will need to be realistic
Question
• What different ways did we use to add value
in the task?
IDENTIFYING WAYS OF
ADDING VALUE
How have the following
companies added value to
their products?
Methods of Adding Value
•
•
•
•
•
•
•
•
•
Convenience
Location
Speed of Service
Packaging
Good Design
Quality
Customer Service
Brand name
USP
Can you think of products that use these methods to
add value
Task
• Watch the video clip – Adding Value
Quick Quiz
1.
2.
3.
4.
5.
What are the four factors of production?
What type of products are intangible?
What is the formula for added value?
Name 4 ways a firm can add value
What is the basic economic problem?