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Edexcel GCSE Business (1BS0) · Theme 2 Building a business
Mini-Lesson

Building a business

This mini-lesson covers Edexcel Theme 2 — Building a business: growing the business, marketing decisions, operational decisions, financial decisions (margins, ARR), and human resource decisions.

growth &marketingoperations& financehumanresources how a business grows beyond start-up

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.

2.1 Growing the business

Growing the business

Businesses grow in two main ways:

  • Internal (organic) growth — expanding using the firm's own resources (new products, new outlets, e-commerce).
  • External growth — merger (two firms join) or takeover (one buys another).

Growing firms may become public limited companies (plc), selling shares on the stock exchange to raise finance, and may aim to trade globally (exports, multinationals, e-commerce).

Ethics & environment matter more as firms grow — trade-offs between profit and doing the right thing affect reputation.

Quick check

Internal or external growth?

?A restaurant chain grows by opening ten new branches of its own, funded from retained profit. What kind of growth is this?
Calculate

Your turn — % sales growth

1Annual sales grow from £400,000 to £500,000. Calculate the percentage growth in sales.
%
Hint: % change = (change ÷ original) × 100 = (100,000 ÷ 400,000) × 100.
2.2 Marketing decisions

Making marketing decisions

As it grows, a business fine-tunes the marketing mix — the 4 Ps:

  • Product — the product life cycle and design mix.
  • Price — penetration, skimming, competitive, cost-plus.
  • Place — retailers, wholesalers, e-commerce.
  • Promotion — advertising, sponsorship, sales promotions, branding.

Consistency: the 4 Ps must work together and suit the target market — a premium product needs a premium price and selective place.

Sort it

Which 'P' of the marketing mix?

Tap a decision, then the 'P' it belongs to.

🏷️ Price

🛒 Place

📢 Promotion

Calculate

Your turn — cost-plus price

2A product costs £25 to make. A 60% mark-up is added. Calculate the selling price.
£
Hint: price = cost × (1 + mark-up) = 25 × 1.60.
2.3 Operational decisions

Making operational decisions

Growing businesses refine how they produce and buy:

  • Production methods: job, batch and flow.
  • Managing stock — bar-gate stock graphs, just-in-time (JIT).
  • Suppliers & procurement — quality, price, reliability.
  • Quality — control vs assurance; total quality management.

Productivity matters: output ÷ number of workers. Higher productivity lowers unit costs.

Calculate

Your turn — labour productivity

3A factory of 10 workers makes 7,000 units a week. Calculate labour productivity (output per worker).
units
Hint: labour productivity = output ÷ workers = 7,000 ÷ 10.
2.4 Financial decisions

Making financial decisions

Bigger businesses judge performance with margins and investment appraisal.

gross profit margin = (gross profit ÷ revenue) × 100
net profit margin = (net profit ÷ revenue) × 100
average rate of return (ARR) = (average annual profit ÷ cost of investment) × 100average annual profit = total profit ÷ number of years
Calculate

Your turn — net profit margin

4A firm has revenue of £200,000 and net profit of £30,000. Calculate the net profit margin.
%
Hint: net profit margin = (net profit ÷ revenue) × 100 = (30,000 ÷ 200,000) × 100.
Calculate

Your turn — ARR

5A machine costs £40,000 and earns a total profit of £24,000 over 4 years. Calculate the average rate of return (ARR).
%
Hint: average annual profit = 24,000 ÷ 4 = 6,000; ARR = (6,000 ÷ 40,000) × 100.
Match it

Match the ratio to its formula

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

Statement
Answer
2.5 Human resource decisions

Making human resource decisions

As it grows, a business manages its people:

  • Organisational structure — hierarchy, span of control, centralised vs decentralised.
  • Recruitment — internal vs external; part-time, full-time, flexible and freelance.
  • Training — induction, on-the-job, off-the-job, ongoing development.
  • Motivation — financial (bonus, commission) and non-financial (job enrichment, promotion).
Quick check

Financial or non-financial motivation?

?A manager motivates a top salesperson by paying a percentage of the value of their sales. Which method is this?
Quick check

Judging financial performance

?One business has a net profit margin of 15% and a rival has 8%, on similar revenue. What does this suggest?
Recap

The big ideas to know

2.1 Growth: internal (organic) vs external (merger/takeover); plc, globalisation, ethics

2.2 Marketing: the 4 Ps working together; pricing strategies (cost-plus = cost × (1 + mark-up))

2.3 Operations: job/batch/flow, JIT stock, quality; productivity = output ÷ workers

2.4 Finance: gross & net profit margins; ARR = (avg annual profit ÷ investment) × 100

2.5 HR: structure, recruitment, training, motivation (financial & non-financial)

You've covered Edexcel Theme 2 — Building a business. Press Finish to see your score.

🏆

Mini-lesson complete!

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