Topics covered in this Unit - Understanding Business Activity

1.1 Business activity

1.1.1 The purpose and nature of business activity:

  • Concepts of needs, wants, scarcity and opportunity cost
  • Importance of specialisation
  • Purpose of business activity
  • The concept of adding value and how added value can be increased

1.2 Classification of businesses

1.2.1 Business activity in terms of primary, secondary and tertiary sectors:

  • Basis of business classification, e.g. by using examples
  • Reasons for the changing importance of business classification, e.g. in developed and developing economies

1.2.2 Classify business enterprises between private sector and public sector in a mixed economy

1.3 Enterprise, business growth and size

1.3.1 Enterprise and entrepreneurship:

  • Characteristics of successful entrepreneurs
  • Contents of a business plan and how business plans assist entrepreneurs
  • Why and how governments support business start-ups, e.g. grants, training

1.3.2 The methods and problems of measuring business size:

  • Methods of measuring business size, e.g. number of people employed, value of output, capital employed (profit is not a method of measuring business size)
  • Limitations of methods of measuring business size

1.3.3 Why some businesses grow and others remain small:

  • Why the owners of a business may want to expand the business
  • Different ways in which businesses can grow
  • Problems linked to business growth and how these might be overcome
  • Why some businesses remain small

1.3.4 Why some (new or established) businesses fail:

  • Causes of business failure, e.g. lack of management skills, changes in the business environment
  • Why new businesses are at a greater risk of failing

1.4 Types of business organisation

1.4.1 The main features of different forms of business organisation:

  • Sole traders, partnerships, private and public limited companies, franchises and joint ventures
  • Differences between unincorporated businesses and limited companies
  • Concepts of risk, ownership and limited liability
  • Recommend and justify a suitable form of business organisation to owners/management in a given situation
  • Business organisations in the public sector, e.g. public corporations

1.5 Business objectives and stakeholder objectives

1.5.1 Businesses can have several objectives – and the importance of these can change:

  • Need for business objectives and the importance of them
  • Different business objectives, e.g. survival, growth, profit and market share
  • Objectives of social enterprises

1.5.2 The role of stakeholder groups involved in business activity:

  • Main internal and external stakeholder groups
  • Objectives of different stakeholder groups
  • Use examples to illustrate these objectives and how they might conflict

1.5.3 Demonstrate an awareness of the differences in the aims and objectives of private sector and public sector enterprises

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