12/23/24, 5:35 PM Business activity - IGCSE Business Revision Notes

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Launchpad Cambridge (CIE) IGCSE Business Revision

The Nature of Business

Activity
Written by: Danielle Maguire
Reviewed by: Steve Vorster

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Needs, Wants, Scarcity and

Opportunity cost
Businesses thrive when they are able to meet customer
needs and wants
Needs are considered to be essential, e.g. shelter or
food
Wants are desires which are not essential, even if
consumers consider them to be essential, e.g Nike
trainers
Due to the problem of scarcity, there is a basic economic
problem
Choices have to be made by producers, consumers,
workers and governments, about the most efficient
use of resources
Resources, known as the factors of production, are
land, labour, capital and Enterprise
Opportunity cost is the loss of the next best alternative
when making a decision
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12/23/24, 5:35 PM Business activity - IGCSE Business Revision Notes

There is an opportunity cost in the allocation of

resources: Upgrade
When a consumer chooses to purchase a new phone,
they may be unable to purchase new jeans
The jeans represent the loss of the next best
alternative (the opportunity cost)
When a producer decides to allocate all of their
resources to producing electric vehicles, they may
be unable to produce petrol vehicles
The petrol vehicles represent the loss of the next
best alternative (the opportunity cost)
When a government decides to provide free school
meals to all primary students in the country, they may
be unable to fund some rural libraries, which may
have to close
The libraries represent the loss of the next best
alternative (the opportunity cost)

The Importance of Specialisation

Specialisation occurs when workers focus on one
particular role or task and thereby gain significant skill in
doing it
It is now more common due to specialised
technology and increasing global competition
Specialisation occurs on several different levels
On an individual level, through the division of labour
Division of labour is the separation of work
processes into tasks that are completed by
separate people or groups of people
On a business level, e.g. one firm may only specialise
in manufacturing drill bits for concrete work
On a regional level, e.g. Silicon Valley has specialised
in the tech industry

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12/23/24, 5:35 PM Business activity - IGCSE Business Revision Notes

On a global level, as countries seek to trade, e.g.

Bangladesh specialises in textiles & exports them to
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the world
It results in higher output per worker, which increases
productivity

The Purpose of Business Activity

The purpose of business activity is to produce goods or
services that meet customer needs while adding value

The purpose of business activity is to take inputs, add value

to them, and create products which meet customer needs

To produce goods or services

The primary purpose of business activity is to produce
goods or services that satisfy a need or demand in the
market
Goods are physical products, such as bicycles and T-
shirts

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12/23/24, 5:35 PM Business activity - IGCSE Business Revision Notes

Services are non-physical items such as hairdressing,

tourism and manicures Upgrade

Meeting customer needs

The ultimate goal is to create products that meet the
needs and preferences of customers and provide value
to them
By meeting customer needs, businesses can build
customer loyalty, increase brand awareness, and
generate revenue

To add value
The third purpose of business activity is to add value to
products or services
Value-added features can differentiate products from
competitors, create a unique selling point, and increase
customer satisfaction
E.g. A product that is easier to use, has a better
design, or is of higher quality than competitors can
create a competitive advantage for a business

Last updated: 8 October 2024

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