1. IGCSE Business Studies
What is a business?

2. 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

3. In Pairs
Can you come up with a definition for the term ‘business’ (No Googling!)
Add your definition to the Google Doc

4. 60 Second Video – Business in a Nutshell

5. What Is a Business?
A business can be defined as an organisation that provides goods and services to others who want or need them

6. What Does a Business Do? Added Value INPUTS OUTPUTS
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

7. Homework Questions Review

8. Needs and Wants

9. 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?

10. 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

11. This is called….. The Basic Economic Problem
Human wants are unlimited but resources are limited

12. HOUSE POINT OPPORTUNITY
RESEARCH TASK
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

13. Business Outputs – Goods and Services

14. Goods and Services…
What is the difference between a good and a service?

15. Goods
Goods are physical objects that can be used or consumed

16. Services
Services are non tangible

17. 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

18. Business InPUTS – The Factors Of Production

19. The Factors of Production
Factors of production are the INPUTS that a business uses to produce their goods and services

20. Task
Write a list of all of the inputs that go into producing …….

21. Task Watch the video… Snickers Unwrapped.
Can you now add anything to your list

22. Good or Service Rent Land Capital Interest Wages Profit Enterprise
The term factors of production relates to the key factors that go into making goods. It is common practice to break these down under a number of headings:
Land
Refers to physical land and other natural resources, e.g. the land that a building is constructed on, oil that is extracted from under the sea, under the land, forests, and fish reserves. Providers of land receive rent.
Labour
Refers to physical and mental effort - e.g. stacking shelves in a supermarket, or calculating the final accounts of a company. Providers of labour receive wages.
Capital
Exists at two levels. First of all we have financial capital. But more importantly, this is used to purchase physical capital that goes into making other things. Physical capital consists of machinery, equipment, tools, etc. Providers of capital receive interest.
Enterprise
Is the skill of combining the other factors of production. Entrepreneurs are the risk takers that set up and run business enterprises. Entrepreneurs receive profit.
Wages
Profit
Enterprise
Labour

23. Which Factors?
Of the inputs for Snickers….. Which factors of production do they represent?
Can you add any more to your list?

24. 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

25. L
Product
Land
Labour
Capital
Enterprise

26. Adding Value…….

27. Adding Value/Added 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 27

28. Calculating Added Value=
Selling Price -
Costs
(Direct)

29. - = For example ADDED VALUE Selling price Of Of finished ? Product
TABLE =
$200
ADDED
VALUE Of ? - =
Material
And costs =
$80

30. Example – iPhone 4s
Here are the estimated costs of making an iPhone 4s 16GB. It retails at £399
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?

31. Task – 5 mins (be ready to justify your answers)
RANK THESE THINGS FROM HIGHEST TO LOWEST VALUE ADDED
Starbucks coffee, slippers, Japanese sushi eggroll, iPod, barbershop haircut, eraser

32. Increasing 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?

33. 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

34. 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
Task sheets available

37. Question
What different ways did we use to add value in the task?

38. IDENTIFYING WAYS OF ADDING VALUE

39. How have the following companies added value to their products?

45. 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

46. Task
Watch the video clip – Adding Value

47. Quick Quiz 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?