Mini-Lesson

Understanding business activity

This mini-lesson covers Cambridge Section 1 — Understanding business activity: the purpose of business and enterprise, classification (sectors), business size and growth, types of organisation, and objectives & stakeholders.

Work through each screen, answer the questions as you go (some are wordy, some are calculations) and collect ⭐ stars. Press Start when you're ready.

1.1 Business activity

The purpose of business activity

Businesses combine the factors of production — land, labour, capital and enterprise — to make goods and services that satisfy people's needs and wants, and to add value.

Enterprise & entrepreneurs: an entrepreneur has a business idea, takes the risk, organises resources and makes decisions. Rewards include profit and independence; risks include losing money.

added value = selling price − cost of bought-in materials

Quick check

Adding value

?A furniture maker buys $40 of wood and sells the finished chair for $150. How is value added here?

Calculate

Your turn — added value

1A baker buys $0.60 of ingredients and sells a cake for $4.00. Calculate the value added per cake.

$

Hint: added value = selling price − cost of inputs = 4.00 − 0.60.

1.2 Classification

Classification of businesses

Businesses are grouped by the economic sector they operate in:

Primary — extracting natural resources (farming, mining, fishing).
Secondary — manufacturing and construction (making goods).
Tertiary — providing services (retail, banking, transport).

Deindustrialisation: as a country develops, the balance often shifts from primary and secondary towards the tertiary (service) sector.

Sort it

Primary, secondary or tertiary?

Tap a business, then the sector it belongs to.

🌾 Primary

🏭 Secondary

🛎️ Tertiary

1.3 Business size & growth

Business size & growth

Business size can be measured by number of employees, revenue, capital employed or output.

Businesses grow in two ways:

Internal (organic) growth — using the firm's own resources (new products, outlets).
External growth — merger (two firms combine) or takeover/acquisition (one buys another).

Why some stay small: the market is small, the owner wants control, or few economies of scale exist.

Quick check

Internal or external growth?

?A café chain grows by taking over a rival chain and running its outlets. What kind of growth is this?

1.4 Types of organisation

Types of business organisation

Cambridge expects you to compare ownership types:

Sole trader — one owner, unlimited liability.
Partnership — 2+ owners, usually unlimited liability.
Private limited company (Ltd) — limited liability, shares sold privately.
Public limited company (plc) — limited liability, shares sold to the public on a stock exchange.

Limited liability protects owners' personal assets; unlimited liability puts them at risk if the business fails.

Match it

Match the term to its meaning

Tap a statement on the left, then the correct term on the right.

Statement

Answer

1.5 Objectives & stakeholders

Objectives & stakeholders

Business objectives include survival, profit, growth, market share and social objectives. SMART objectives are Specific, Measurable, Achievable, Realistic and Time-bound.

Stakeholders are groups with an interest in the business: owners, workers, customers, suppliers, government and the local community. Their objectives can conflict.

Calculate

Your turn — market share

2A firm sells $5m of goods in a market worth $40m. Calculate its market share.

%

Hint: market share = (firm sales ÷ total market) × 100 = (5 ÷ 40) × 100.

Calculate

Your turn — % growth

3A business grows sales from $200,000 to $250,000. Calculate the percentage growth.

%

Hint: % change = (change ÷ original) × 100 = (50,000 ÷ 200,000) × 100.

Calculate

Your turn — profit

4A firm has revenue of $90,000 and total costs of $68,000. Calculate its profit.

$

Hint: profit = total revenue − total costs = 90,000 − 68,000.

Calculate

Your turn — value added total

5A workshop makes 500 items, each adding $12 of value. Calculate the total value added.

$

Hint: total value added = value per item × number of items = 12 × 500.

Quick check

Conflicting objectives

?Owners want to cut costs by paying suppliers less and later. Which stakeholder's objectives does this most directly conflict with?

Recap

The big ideas to know

Purpose: factors of production make goods/services and add value (price − materials); entrepreneurs take risk

Classification: primary (extract) · secondary (make) · tertiary (services)

Size & growth: internal (organic) vs external (merger/takeover)

Types: sole trader, partnership, Ltd, plc; limited vs unlimited liability

Objectives & stakeholders: survival, profit, growth, market share; stakeholder objectives can conflict

You've covered Cambridge Section 1 — Understanding business activity. Press Finish to see your score.

🏆

Mini-lesson complete!

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You've worked through Understanding business activity for Cambridge IGCSE Business Studies. 🎉

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