3.1 Business in the real world
The purpose of business activity, the role of business enterprise and
entrepreneurship, and the dynamic nature of business.
Students need to be aware of the impact business in the real world has
on the four functional areas of business:
- business operations
- human resources
- marketing
- finance.
The purpose and nature of businesses
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Content
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Additional information
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- Purpose of business
- Reasons for starting a business
- Basic functions and types of business
- Business enterprise and entrepreneurship
- Dynamic nature of business
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Students should be able to:
- understand what a business is and the reasons for starting a
business (including producing goods, supplying services, distributing products,
fulfilling a business opportunity and providing a good or service to benefit
others)
- understand the difference between goods and services, needs and
wants
- understand the meaning of factors of production – land, labour,
capital, enterprise
- define opportunity cost
- define the three sectors of primary, secondary and tertiary and give
examples of types of business that operate in each sector
- understand the term enterprise and what is meant by an
entrepreneur
- outline the characteristics of an entrepreneur, such as hard
working, innovative, organised and willingness to take a risk
- outline the objectives of an entrepreneur, including to be their own
boss, flexible working
hours, to pursue an
interest, earn more money, identify a gap in the market and
dissatisfaction with current job
- understand that businesses face a constantly changing business
environment due to changes in technology, economic situation, legislation and
environmental expectations.
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Business ownership
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- Sole traders
- Partnerships
- Private limited companies (ltd)
- Public limited companies (plc)
- Not-for-profit organisations
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Students should be able to:
- understand the different legal structures that businesses adopt
- analyse the benefits and drawbacks of each legal structure (including issues such as
management and control, sources of finance available, liability
and distribution of profits)
- understand the concept of limited liability and which legal structures benefit from
this
- evaluate which legal structure would be most appropriate for a variety of business
examples, including new start-up businesses and large
established businesses.
Students are not expected to have an understanding
of the legal process of incorporation.
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Setting business aims and objectives
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- What are business aims and objectives
- Purpose of setting objectives
- Role of objectives in running a business
- Changing objectives
- Use of objectives in judging success
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Students should be able to:
- understand the main aims and objectives for businesses: survival, profit
maximisation, growth (domestic and international), market share,
customer satisfaction, social and ethical objectives and
shareholder value
- understand the role of objectives in running a business
- understand how and why the objectives set will differ between businesses (reasons
include the size of the business, level of competition faced and
type of business (not-for-profit organisations))
- understand how and why the objectives set may change as businesses evolve. Students
should consider how the objectives of larger more established
businesses might differ from smaller start-up businesses, eg
becoming the dominant business in the market, international
expansion, increasing shareholder value and ethical and
environmental considerations
- understand the success of a business can be measured in other ways than profit.
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Stakeholders
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- Main stakeholders of businesses
- Objectives of stakeholders
- Impact of business activity on stakeholders
- Impact and influence stakeholders have on businesses
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Students should be able to:
- understand what is meant by a stakeholder and who the main stakeholders of a
business are, including owners, employees, customers, local
community and suppliers
- understand stakeholders’ main objectives including maximising pay for workers,
minimising environmental impact on local community and high
dividend payments for owners
- understand the impact and influence stakeholders have on businesses and their
objectives and how businesses may face conflict between
stakeholders.
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Business location
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Additional information
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Factors influencing the location decision of a business
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Students should be able to understand the factors that influence where a business is located, including proximity to the market, availability of raw materials, labour, competition and costs.
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Business planning
Content
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Additional information
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- The purpose of business
planning
- The main sections within a business
plan
- Basic financial terms
- Basic financial calculations
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Students should be able to:
- understand the reasons why
businesses create plans, including importance in
setting up a new business, raising finance,
setting objectives and detailing how functions of
a business will be organised
- understand the main sections of a
business plan
- analyse the benefits and drawbacks
of business planning
- understand the
difference between variable costs, fixed costs and
total costs
- understand the concept of
revenue, costs, profit and loss.
Students will not be expected to write a business
plan.
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Expanding a business
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Additional information
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- Methods of expansion
- Benefits and drawbacks of expansion
- Economies of scale
- Diseconomies of scale
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Students should be able to:
- discuss the advantages and
disadvantages of methods of growth
- understand the methods used by businesses when
expanding (organic growth through franchising, opening new
stores and expanding through
e-commerce, outsourcing and
external growth through mergers and takeovers)
- understand the benefits of growth in terms of unit
cost advantages due to economies of scale and the drawbacks of
growth due to diseconomies of scale
- understand the meaning of purchasing and technical
economies of scale
- understand that with growth businesses increase the
risk of diseconomies of scale occurring due to poor
communication, coordination issues and reduced staff
motivation
- calculate and interpret average unit costs.
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