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What is the purpose of business activity?
What is the purpose of business activity?
To provide certain goods and/or services to satisfy human needs and wants.
What is the primary objective of business activity?
What is the primary objective of business activity?
What are the four main factors of production?
What are the four main factors of production?
Land, Labour, Capital, and Enterprise
Human needs are the same as human wants.
Human needs are the same as human wants.
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The process of combining factors of production to provide goods and/or services to satisfy human needs and wants is called ______________________.
The process of combining factors of production to provide goods and/or services to satisfy human needs and wants is called ______________________.
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What is the importance of entrepreneurship in business activity?
What is the importance of entrepreneurship in business activity?
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According to Paul Samuelson, why are human beings always left with some wants that remain unsatisfied?
According to Paul Samuelson, why are human beings always left with some wants that remain unsatisfied?
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What gives rise to the basic economic problem of scarcity?
What gives rise to the basic economic problem of scarcity?
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Opportunity cost is the next best alternative ________.
Opportunity cost is the next best alternative ________.
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What is the purpose of a business enterprise?
What is the purpose of a business enterprise?
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Match the group affected by the economic problem with its available resources and choices:
Match the group affected by the economic problem with its available resources and choices:
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Which measures are commonly used to determine the size of a business?
Which measures are commonly used to determine the size of a business?
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Division of labor is a form of specialization where each worker performs various tasks.
Division of labor is a form of specialization where each worker performs various tasks.
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What is the importance of specialization in the context of resources?
What is the importance of specialization in the context of resources?
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The ___________ system involves the coexistence of both private and public sectors.
The ___________ system involves the coexistence of both private and public sectors.
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Competition between private and public sectors in a mixed economic system leads to resource wastage.
Competition between private and public sectors in a mixed economic system leads to resource wastage.
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What are some potential problems associated with adding value to products?
What are some potential problems associated with adding value to products?
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Based on the content, what factors does added value depend on?
Based on the content, what factors does added value depend on?
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The __________ sector involves businesses in the extraction of natural resources.
The __________ sector involves businesses in the extraction of natural resources.
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Match the business sectors with their descriptions:
Match the business sectors with their descriptions:
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Private sector enterprises are mainly driven by profit motives.
Private sector enterprises are mainly driven by profit motives.
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What are some reasons why some established businesses might fail?
What are some reasons why some established businesses might fail?
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Match the types of private sector businesses with their descriptions:
Match the types of private sector businesses with their descriptions:
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Profit is a method of measuring business size. (True/False)
Profit is a method of measuring business size. (True/False)
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Which of the following are features of a sole trader business?
Which of the following are features of a sole trader business?
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Partnerships often face challenges related to decision making due to the need for unanimous agreement on all matters.
Partnerships often face challenges related to decision making due to the need for unanimous agreement on all matters.
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What is the purpose of using the number of employees for comparing the size of firms in the same industry?
What is the purpose of using the number of employees for comparing the size of firms in the same industry?
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Define 'Capital Employed'.
Define 'Capital Employed'.
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Match the following terms with their descriptions:
Match the following terms with their descriptions:
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Define 'Dividend'.
Define 'Dividend'.
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What is 'Limited Liability'?
What is 'Limited Liability'?
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What are some advantages of a Private Limited Company (Ltd.)? Choose all that apply.
What are some advantages of a Private Limited Company (Ltd.)? Choose all that apply.
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A Private Limited Company generally consists of 2-50 shareholders.
A Private Limited Company generally consists of 2-50 shareholders.
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What 'legal documents' are typically prepared for the incorporation of a Private Limited Company? Memorandum of Association and Article of Association are submitted to the ______ of Companies.
What 'legal documents' are typically prepared for the incorporation of a Private Limited Company? Memorandum of Association and Article of Association are submitted to the ______ of Companies.
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Match the following terms with their definitions:
Match the following terms with their definitions:
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What is a franchise?
What is a franchise?
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What are some advantages for the franchisor in a franchise arrangement?
What are some advantages for the franchisor in a franchise arrangement?
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What problems can a franchisor face if a franchisee engages in unprofessional business practices? Unprofessional business practice by any franchisee may affect the entire business ________________.
What problems can a franchisor face if a franchisee engages in unprofessional business practices? Unprofessional business practice by any franchisee may affect the entire business ________________.
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Franchisors bear all the risks and capital investments in a franchise arrangement.
Franchisors bear all the risks and capital investments in a franchise arrangement.
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What are the advantages of backward integration or growth?
What are the advantages of backward integration or growth?
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What are the disadvantages of backward integration or growth?
What are the disadvantages of backward integration or growth?
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What is forward vertical integration in business?
What is forward vertical integration in business?
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What are the advantages of forward vertical growth?
What are the advantages of forward vertical growth?
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What are the disadvantages of forward vertical growth?
What are the disadvantages of forward vertical growth?
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Explain lateral integration in business with an example.
Explain lateral integration in business with an example.
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Define conglomerate integration in business and provide an example.
Define conglomerate integration in business and provide an example.
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What are the advantages of diversification through conglomerate integration?
What are the advantages of diversification through conglomerate integration?
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What are the disadvantages of diversification through conglomerate integration?
What are the disadvantages of diversification through conglomerate integration?
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What is a joint venture in business?
What is a joint venture in business?
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What are the advantages of joint ventures to businesses?
What are the advantages of joint ventures to businesses?
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What are the potential problems of joint ventures between businesses?
What are the potential problems of joint ventures between businesses?
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What are some common problems associated with business growth?
What are some common problems associated with business growth?
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How might businesses overcome growth problems?
How might businesses overcome growth problems?
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Why do some businesses choose to remain small?
Why do some businesses choose to remain small?
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Explain the importance/significance of small businesses.
Explain the importance/significance of small businesses.
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How do small firms compete with larger firms producing the same products?
How do small firms compete with larger firms producing the same products?
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What are the advantages of small businesses?
What are the advantages of small businesses?
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What are some problems associated with small businesses?
What are some problems associated with small businesses?
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What forms of government assistance are available to small businesses?
What forms of government assistance are available to small businesses?
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What are some reasons for government constraints on business size or activities?
What are some reasons for government constraints on business size or activities?
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Why do some new businesses fail? Provide some common causes.
Why do some new businesses fail? Provide some common causes.
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Why are new businesses at a greater risk of failing?
Why are new businesses at a greater risk of failing?
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Study Notes
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
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Value added: The difference between the selling price and the cost of bought-in materials in a final product.
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Example: Value added = Selling price - Cost of bought-in materials.### Value Added and Profit
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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.
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Value added does not include manufacturing expenses, labour costs, administrative costs, and selling and distribution costs.
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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
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Description
Learn about the four assessment objectives in Cambridge O Level Business Studies, including knowledge and understanding, application, analysis, and evaluation.