Business Studies

0450
Secondary 3
 Discussion
What is business?

Why do people do business?

What is IGCSE Business

Introduction Structure of examination

Content of syllabus

Basic Terms in Business

Mostly used business vocabularies
• Profit: The financial gain obtained when the revenue earned from
a business activity exceeds the expenses, costs, and taxes.
• Market Research: The process of gathering, analyzing, and
interpreting information about a market, including information
about the target market and customers.
• Entrepreneur: An individual who creates, organizes, and operates a
business, taking on financial risks to do so.
• Stakeholder: Any person, group, or organization that can affect or
be affected by a business's actions, objectives, and policies.
• Economies of Scale: The cost advantage that arises with increased
output of a product, as the fixed costs are spread over a larger
number of goods.
Mostly used business vocabularies
• Revenue: The income generated from normal business operations,
such as the sale of goods and services.
• Liquidity: The ability of a company to meet its short-term financial
obligations, often measured by current assets minus current liabilities.
• Franchise: A type of business in which a person or entity buys the
rights to use a business's trademark, trade name, and business model.
• Business Plan: A formal written document containing the goals of a
business, the methods for attaining those goals, and the timeframe for
the achievement of the goals.
• SWOT Analysis: A strategic planning tool that assesses a company's
strengths, weaknesses, opportunities, and threats.
 • An organisation which
produces goods and
Business services
• Any activity designed
to make profit.
 Capital intensive production:
Capital Production methods that make more
use of machinery relative to labour
Intensive and
Labour
Labour intensive production:
Intensive Production methods that make more
use of labour relative to Machine
Identify capital- & labour-intensive
production
• Food processing (e.g. ready meals)
• Hotels & restaurants
• Fruit farming / picking
• Hairdressing & other personal services
• Coal mining
• Oil extraction & refining
• Car manufacturing
• Web hosting
• Intensive arable farming
• Transport (airports, railways etc)
 Capital
Intensive
production
Labour
Intensive
Production
 Consumer goods: Goods and
services sold to ordinary
Producer and people rather than businesses
Consumer
Goods Producer goods: Goods and
services sold to businesses
rather than ordinary people.
Factors of • Factors of production: The resources used to produce
goods and services. They include land, labour, capital and
Production enterprise
 • Entrepreneur: An individual who organises the other
Entrepreneur factors of production and risks their own money in a
business venture
 Business
Production
Distribution (Commerce)
(Industries)
Aids to
Trade
Trade
Primary
Industries Home Foreign Transportation
Trade Trade
Warehousing
Secondary
Export
Industries Trade Communication
Wholesale
Trade
Tertiary Import Advertising
Industries Retail
Trade
Banking and
Trade Entrepôt Insurance
Trade
 Business sector owned
controlled and managed by
Private and Private people is private sector
Public Sector
Business sector owned
controlled and managed by
Government is public sector
Examples
Public Sector business in Myanmar
• Myanma Economic Holdings Limited.
• Myanma Gems Enterprise.
• Myanma Oil and Gas Enterprise.
• Myanma Pharmaceutical Industry Enterprise.
• Myanma Posts and Telecommunications.
• Myanma Timber Enterprise.
• Myanmar Directorate of Defence Industries.
• Myanmar Economic Corporation.
Return to Factors
of production
• Land: Rent
• Labour: Salary and
wages
• Capital: Interest
• Entrepreneur/
Enterprise: Profit
Limited and Unlimited liability
• The anticipated loss is limited to certain amount it is said to be limited
liability
• If the anticipated loss is not limited to a specific amount, it is said to
be unlimited liability
• In case of unlimited liability, the owner’s personal properties will be
used to settle the debts of the business.
Types of Business

• Sole trader (Maximum 1 owner) Proprietorship (Unlimited Liability)

• Partnership (Min 2 and Max 20 Owners) (Unlimited Liability)
• Joint Stock Company
• Private limited Company (Min 1 and Maximum 50 Owners)
• Public Limited Company (Min 1 and Maximum unlimited)
• Co-operative society (Minimum 10 and maximum unlimited)
• Multinational Company (Limited Liability)
• Franchisee (Franchisor has no responsibility of loss)
Economic Resources in Detail
• Land: Land is defined as all the natural resources used to produce
goods and services, including the land in its general meaning, the
minerals and nutrients in the ground, the water, wildlife, and
vegetation on the surface and the air above.
• Land is a gift of nature.
• The reward for land is rent.
• Some natural resources are renewable whilst others are non-
renewable.
Renewable and non-renewable resources.
• Renewable resources are replaced by natural processes at a rate
comparable or faster than its rate of consumption by humans.
Examples include wind power, rainwater… etc.
• Nonrenewable resources are non-replaceable and are reduced by
use. These resources cannot be produced, re-grown, regenerated, or
reused on a scale which can sustain its consumption rate. Examples
include gold, oil…etc. There is the possibility that some renewable
resources can be turned into non-renewable resources, if they are
overexploited.
Factors of production: Labour
• Features
• Any human effort used in the production process is referred as labour.
• Labour is a human resource.
• The reward for labour is salary or wage.
• Labour is both geographically and occupationally mobile.
• Skilled, Semiskilled and unskilled labour
Skilled, Semi-Skilled and unskilled labour
 Skilled, Semi-skilled and unskilled workers
Skilled Semiskilled Unskilled
Chef Bartenders janitors
Carpenter Truck drivers fast food workers
Electrician Taxi drivers maids
Engineers Flight attendants furniture movers
Lawyer Security guards
Registered Nurse Retail sales personnel
Teachers Waiters
Doctors
Scientists
Mobility and
Immobility
of labour
Supply of labour

• Supply of labour is described as the total number of hours labour is willing

and able to supply at a given wage rate. A country’s supply of labour is
determined by various factors. They are:
• The size of the total population
• The size of working population
• The wage rate provided
• The length of annual holiday
• The length of the working hours…etc.
Specialisation and division of labour

• Specialization occurs when people and business concentrate on what they are
best at.
• Examples: Business Studies Teacher, ophthalmologist, Cardiologist, etc..
• Discuss:
• Identify the specialized businesses
• What makes them specialized in?
• Is there any benefits of being specialized?
• Drawbacks of specialization
Specialisation and division of labour

• Benefits/Advantages/Merits
• Workers become self sufficient
• Improves the quality of production
• Helps to improve the output
• Demerits/Disadvantages/Drawbacks
• Workers may feel boredom
• Breakdown in one session will affect the entire system
• Deteriorates the craftmanship or talents
Working without Specialisation
Working with Specialisation and division of
labour
Factors of production: Enterprise

Features
• The entrepreneur bears the risk of organizing the factors of production.
• Enterprise is the entrepreneur’s willingness and ability to bear uncertain
risks and to make decisions in a business.
• Enterprise is the most mobile factor occupationally and geographically.
• The reward for entrepreneur is profit.
 The functions of entrepreneurs
• Entrepreneurs are the organizers: They are responsible to arrange the factors of
production. He employs land, labour and capital for the process of production.
• Entrepreneurs are the managers: They take the responsibility of managing the
factors of production and production process. He pays the reward for the other
factors of production.
• Entrepreneurs are the decision makers
They take all the important decisions regarding their enterprises.
• Entrepreneurs are the risk bearers
• They must be responsible for both expected and unforeseen risks. They must
bear the losses of their businesses.
• Entrepreneurs are the profit gainers
• If their businesses become successful, they gain the profit. The reward for the
entrepreneur is profit.
Let's discuss

• Value Added (Adding value)

• How do we fix the price for
the products?
• Your version of answer
• Write on a paper
• Discuss each other
• Set a sample product and
fix its price.
Why should the customer buy your product?

Meaning: An improvement or addition to something that makes it worth more

Serving Chicken
biriyani @ $1.50
per person
 Serving Chicken
biriyani @ $25 per
person
How can we add value?
1.Increase Revenue.
• Extend your network.
• Build a positive reputation.
• Look for opportunities to innovate.
2.Reduce Costs.
• Identify cost savings.
• Restructure your processes.
3.Look Beyond the Bottom Line.
• Align your tasks with organizational objectives.
• Use your initiative.
 Opportunity cost
• The cost of foregone choice
• The cost of given up choice
• The cost of next best alternative
 Allocation of resources in
various types of Economy

Traditional Economy

Command Economy

Market Economy

Mixed Economy
Practice questions
1. Gowri plans to start up her own business using her own savings. She wants
to produce fashion clothes for women. She is a very good clothes designer,
but she does not like stitching clothes together. Two friends have offered to
help Gowri. Abha is an experienced material cutter - she can cut lengths of
material for clothes with very little wastage. Aditi is quick at sewing.
a) What is meant by 'business’? [2]
b) Identify two factors of production that Gowri will need for her new
business. [2]
c) Identify and explain two possible opportunity costs that Gowri may have
from her decision to start her own business. [4
D) Identify and explain one advantage and one disadvantage to Gowri’s
business of using division of labour in making clothes. (6)
E) Do you think that Gowri’s business will be able to sell all of the clothes that
it makes? Justify your answer. [6]
 Answer
a) What is meant by business?
A business is basically a group of people who work together to achieve a
common goal. People work in a business to create and sell goods and
services. Other people are the ones who purchase the goods and services.
b) Identify two factors of production that Gowri will need for her new
business.
The two factors of production Gowri will need include land and labour
c) Identify and explain two possible opportunity costs that Gowri may have
from her decision to start her own business.
Opportunity cost refers to the things that we forgo in order to achieve
another thing. In this case, she will forgo leisure and something else that
could have used the money for.
• d) identify and explain one advantage and one disadvantage
to Gowri’s business of using division of labour in making
clothes.
An advantage of division of labour is that it makes work
easier while the disadvantage is that it leads to repetition
since the workers continue to do the same thing every time.
• e) do you think that Gowri’s business will be able to sell all of
the clothes that is makes? Justify your answer.
I think Gowri’s business will not be able to sell all the clothes
that it makes even though she’s a good designer. She’s just
starting up and it’ll take time before she’s well known.
Mohammed owns a bakery. He makes bread and cakes. He employs three
workers who help him mix the dough for the bread and cakes, put the dough into
tins, bake the bread and cakes and serve customers. Mohammed has calculated
that the added value of his business is low. His customers complain when he tries
to put up prices. ‘We can buy the same bread and cakes at lower prices they tell
him. `
a) What is meant by 'added value’? (2)
b) Mohammed has just bought a new oven. Explain 'opportunity cost to
Mohammed. [2]
c) Identify and explain two benefits to Mohammed's business of all of his workers
being able to do all of the jobs in the bakery. (4)
d) Identify and explain two ways in which Mohammed could increase cost’ to the
value added of his bakery business. (6)
e) A friend told Mohammed 'Your business would be more successful if you only
served in the shop and let your workers make the bread and cakes. Do you agree?
Justify your answer. [6]
1 a)
Any organisation that brings resources together to produce a good or service to satisfy wants.
b) i) Sewing machine
ii) Aditi’s labour (sewing skills)
Other relevant answers possible.
c) i) Buying a sewing machine means that Gowri has less money to spend on other items, for
example, on a computer to keep a record of the accounts of her business; the next most desired
one would be the opportunity cost.
ii) Time that Gowri spends on setting up her business means that she cannot earn money designing
clothes for another business.
d) Advantage: Aditi will become even more skilled at sewing and Abha at cutting. This will
make Gowri’s business more efficient. Disadvantage: Gowri will not learn these other skills as she
may spend all her time designing dresses. If Aditi is ill there will be no one to sew the dresses and
production will fall.
e) Sales of dresses will depend on how good the designs are and the quality of the dresses. If other
businesses exist then there will be a lot of competition which will reduce chances of success. If
Gowri knows what her customers want in terms of designs, price and quality then this will increase
chances of selling all dresses the business makes. Overall conclusion/judgement needed