IGCSE Business Studies

What is a business?

Learning Outcomes

• Understand the purpose of business activity

• Understand the concepts of needs, wants, scarcity and opportunity cost

• 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?

The Business

INPUTS OUTPUTS

The overall aim of most businesses is to spend less on their inputs than they earn from their outputs and make a PROFIT

Processes

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

Human wants are unlimited but resources are limited

This is called…..The Basic Economic

Problem

In pairs try to find out what the term ‘opportunity cost’ means.

How is it linked with the economic problem? Use an example to show your understanding

RESEARCH TASK

HOUSE POINT OPPORTUNIT

Y

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

Good or Service

Land

Labour

Capital

EnterprisePro

fit

Wages

Rent Interest

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 templateChoose a productMake a diagram to show the different inputs

that it requires. Include some images.Split into the 4 different factors of

production

L

Product

Land Labour

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 priceOf finished

ProductTABLE

=$200

-Material And costs

=$80

=

ADDED VALUE

Of ?

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?

RANK THESE THINGS FROM HIGHEST TO LOWEST VALUE ADDED

Task – 5 mins (be ready to justify your answers)

Increasing Added Value

What ways are there to add value?•Decrease Costs•Increase Selling PriceWill these methods always work? What could go wrong?

Added Value Selling Price Costs(Direct)

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. What are the four factors of production?2. What type of products are intangible?3. What is the formula for added value?4. Name 4 ways a firm can add value5. What is the basic economic problem?