Cambridge O Level Business Studies Assessment Objectives

Cambridge O Level Business Studies Assessment Objectives

• AO1: Knowledge and understanding (40% weightage in O Level)
• AO2: Application (20% weightage in O Level)
• AO3: Analysis (25% weightage in O Level)
• AO4: Evaluation (15% weightage in O Level)

International Accounting Terminology

• Financial statements: Final accounts
• Statement of financial position: Balance sheet
• Intangible assets: Goodwill, etc.
• Non-current assets: Fixed assets
• Inventory: Stock
• Trade receivables: Debtors
• Current liabilities: Creditors: amount due within 12 months
• Capital or Equity: Share capital
• Non-current liability: Long-term liability

Understanding Business Activity

• Business activity: Combining factors of production to provide goods and/or services to satisfy human needs and wants for a reward.
• Purpose of business activity:
  • To provide certain goods and/or services to satisfy human needs and wants.
  • To contribute towards economic prosperity.
  • To provide employment opportunities.
  • To raise the standard of living.
  • To make a country popular, attracting further investment.
• Importance of business activity:
  • Provides certain goods and/or services to satisfy human needs and wants.
  • Contributes towards economic prosperity.
  • Provides employment opportunities.
  • Raises the standard of living.
  • Makes a country popular, attracting further investment.
• Problems of business activity:
  • Involves in unethical and non-ecological activities.
  • May operate with high social costs.
  • Profit motive often leads to worker and consumer exploitation.
  • May overexploit and deplete non-renewable natural resources.
  • Causes harm to natural beauty and national heritage.

Factors of Production

• Land: Includes all natural resources and gifts of nature.
• Labour: Physical and mental effort exerted by a human being in the production of goods and/or services.
• Capital: Includes all man-made aids to production, such as finance, machines, and equipment.
• Enterprise: Innovative and risk-taking skills of people who combine resources to provide goods and/or services.

Importance of Each Factor of Production

• Land: To extract minerals, raw materials, and locate the business.
• Labour: To undertake production processes, plan, organise, coordinate, command, and control business activities.
• Capital: To purchase machines and equipment, finance other activities, and provide intellectual capital.
• Enterprise: To combine factors, ensure efficient utilisation of resources, and encourage further investment.

Human Needs and Wants

• Human needs: Essential goods and services that are vital for human survival.
• Human wants: Goods and services that are desired but not essential for living.

The Economic Problem - Scarcity

• Unlimited wants > Means or resources = Scarcity.
• Scarcity leads to choice and opportunity cost.
• Opportunity cost: The next best alternative foregone.

Specialisation

• Division of labour: Breaking down a whole job into various simpler tasks, where each worker performs a specific task.
• Importance of specialisation:
  • For sustainable development.
  • For more efficient utilisation of resources.
  • To keep costs low and face competition.
  • To utilise specialist technology.
  • To continuously improve living standards.
  • To create value to available resources.
• Benefits of specialisation:
  • Less wastages.
  • Saves time.
  • Workers become specialists.
  • Machines and equipment can be used for each specific task.
  • Greater individual output reduces total unit cost.
• Problems of specialisation:
  • High risk of accidents.
  • Monotony and boredom.
  • Structural unemployment.
  • Workers become over-dependent on other workers.
  • Machine breakdown or delay in any task affects the whole process.

The Concept of Adding Value

• Value added: The difference between the selling price and the cost of bought-in materials in a final product.

• Example: Value added = Selling price - Cost of bought-in materials.### Value Added and Profit

• Value added is not the same as profit, and only considers the cost of bought-in inputs (raw materials and components) in the final product.

• Value added does not include manufacturing expenses, labour costs, administrative costs, and selling and distribution costs.

• An increase in value added may not necessarily increase profits to the same extent, as profit depends on other expenses incurred.

How to Increase Value Added

• Adding new features to a product
• Modifying product design
• Using better quality materials and other inputs
• Applying marketing strategies
• Providing financial facilities
• Selling same product under another brand (rebranding)
• Ethical/sustainable/ecological practices

Importance of Adding Value

• Retaliating to high added value products of competitors
• Retaining existing customers through differentiated products
• Meeting ever-changing customer needs
• Extending a product's market existence
• Making demand for its products less price elastic and increasing profit margins
• More efficient utilization of resources (sustainability)
• Triggering and encouraging innovation, research, and development

Benefits of Adding Value

• Attracting and retaining customers
• Competitive advantage over rivals through new products
• Exploring other potential markets
• Extending a product's market existence
• Increasing sales, revenue, profits, and market share

Problems of Adding Value

• May involve huge investment and risks
• Does not guarantee profit
• May instigate other rivals for cutthroat competition
• Customers have to pay the price
• Customers may be misguided

Evaluation of Adding Value

• Adding value depends on competitors' products, price elasticity of demand, customers' tastes and disposable income, marketing strategy, and rate of technological development

Classification of Businesses

• Primary sector: extraction of natural resources (e.g., mining, fishing, farming)
• Secondary sector: conversion of materials into semi-finished and finished goods (e.g., manufacturing, processing)
• Tertiary sector: provision of services (e.g., banking, insurance, marketing)

Levels of Business Activity

• Primary sector: extraction of natural resources
• Secondary sector: conversion of materials into semi-finished and finished goods
• Tertiary sector: provision of services
• Quaternary sector: knowledge-based services (e.g., research and development, consulting)

Importance of Business Classification

• Measured by percentage of total workforce employed and percentage contribution to GDP
• Highest proportion of employment and contribution to GDP means greater importance

Changing Importance of Business Classification

• Reasons for change: increase in per capita disposable income, higher literacy rate, globalisation, westernisation, development in ICT, and climatic change
• Example: the Mauritian economy, which has diversified from sugar-based to manufacturing, tourism, and service-based economy### Entrepreneurship
• An entrepreneur is someone who identifies a market opportunity and exploits it by organizing resources effectively to accomplish an outcome that changes existing interactions within a given sector.
• An entrepreneur is also an investor who takes risks by investing capital and combining resources to provide a commodity for a reward, often profit.

Benefits of Being an Entrepreneur

• Independence: being one's own boss with control over time, money, and resources
• Potential for greater income through profits
• Ability to utilize personal interests, skills, knowledge, and capabilities
• Fulfillment of ambition and wishes
• Gain self-confidence and self-esteem
• Potential for fame, e.g., Bill Gates

Problems of Being an Entrepreneur

• Greater risk: potential loss of invested money and resources
• Lack of know-how and experience for running a new business
• Opportunity cost: resources could be used elsewhere
• Responsibility for all stakeholders, e.g., employees and family members
• Greater personal commitment, leading to limited time for social matters
• No guaranteed income
• Difficulty in achieving a work-life balance

The Role of an Entrepreneur

• Prepare business plans and forecasts
• Organize and allocate factors of production
• Combine factors of production
• Seek better business opportunities
• Lead and motivate employees
• Define business mission, vision, and objectives
• Devise strategies to adapt to a changing business environment
• Operate within the legal framework to make profits
• Innovate products and implement new ideas to satisfy human wants and needs

Qualities of Successful Entrepreneurs

• New ventures
• Creativity and innovative business ideas
• Visionary
• Inner drive to succeed
• Passion about products/services
• Risk-taking
• Willingness to learn
• Removing obstacles to progress
• Setting big goals
• Strong self-confidence
• Assertive personality
• Focused
• Willing to change
• Aware of the latest technology and ideas
• Thrives on competition
• Very energetic

Role of Business Enterprise in the Development of a Country

• Determines the level of success, prosperity, growth, and opportunity in an economy
• Triggers production and sale of new products and services
• Undertakes risk to profit by satisfying unsatisfied needs
• Creates value to scarce resources in the nation
• Improves overall standard of living
• Makes a nation popular and attracts more investments
• Benefits society, e.g., creation of social enterprises

Business Plan

• A written document that describes a business, its objectives, and strategies, the market it is in, and its financial forecasts
• Contents of a business plan:
  • Executive summary
  • Description of business opportunity
  • Marketing and sales strategy
  • Management team and personnel
  • Operations
  • Financial forecasts

Importance of Business Plans

• To obtain start-up capital
• Provide a clear sense of purpose, direction, marketing strategies, and type of employees to recruit
• Financial, HR, Operations, and Marketing plans can be used as targets
• Useful for rewriting and adapting plans to accommodate new or revised strategies
• Original financial forecasts can act as budgets and control benchmarks
• Updated versions can be used for additional funding or to attract partners or go public

Government Support for Business Start-Ups

• Reduce unemployment levels
• Encourage local production and create greater value to available resources
• Support and attract larger firms and foreign investment, increasing competition
• Promote economic growth and provision of goods and services at lower costs
• Reduce overdependence on imports and reduce balance of payments deficits
• Regional development
• Preserve traditional products, culture, and processes
• Benefit society, e.g., creation of social enterprises

Methods of Government Support

• Grants
• Training schemes
• Research and Development facilities
• Technical support
• Finance support schemes
• Assistance in preparing good business plans
• Fiscal policies, e.g., tax holidays, low corporation tax
• Creation of industrial zones with set-up facilities
• Attracting large businesses, allowing local support enterprises to start up

Learn about the four assessment objectives in Cambridge O Level Business Studies, including knowledge and understanding, application, analysis, and evaluation.