What is added value? Added value is the difference between the selling price and the cost price
of a good or service.
Why is added value important?: because sales revenue is greater than the cost of materials
bought in by the business. This means that the business:
● Can pay labour costs, management expenses and costs like advertising and power
● May be able to make a profit
● Wages and rent are part of added value.
● Profit is the money left over after paying wages and rent from the added value
How is value-added:
1- Adding extra features to the product
2- Branding and ensuring good quality
3- Improved design and having a unique selling point (USP)
SECTORS:
PRIMARY SECTOR:
The primary sector of industry Riextracts natural resources of the Earth to produce raw
materials used by other businesses eg. farming, fishing, forestry, extraction of natural materials
SECONDARY SECTOR:
Manufacturers goods using raw materials provided by the primary sector eg. building,
constructing, car manufacturing
TERTIARY SECTOR:
Provides services to consumers and other sectors of industry eg. transport, banking, retail,
hotels
What is deindustrialisation?: when there is a decline in the importance of the secondary
(manufacturing) sector of industry in a country
Why does the importance of sectors change?:
- sources of primary products become depleted
- most developed economies losing competitiveness in manufacturing to newly
industrialised countries
- countries with higher living standards focus more on secondary and tertiary services
rather than primary
,Posted by: Khadija Awad
MIXED ECONOMY: has both public and private sectors
PUBLIC PRIVATE
- government or state-owned and - business not owned by the
controlled businesses government
- authority makes decisions about what - make their own choices about what to
to produce and charge for produce and what to charge for
- could be paid by taxes (eg. health, - they aim to run profitably
water)
PRIVATISATION:
when the government sells some of the public industry services to private owners/ private
owned companies
Advantages:
private sectors are often more effective than public
Sectors, since they run on profit, they have more
money and capital to invest with than the public sectors.
competition between private sectors can help improve
quality
Disadvantages:
could make more workers unemployed than a public sector
business to cut costs, less likely to focus
on social objectives
What are the advantages/ disadvantages of being an entrepreneur:
Advantages Disadvantages
- Independence (being able to choose - Risk (could fail if poorly planned)
how to use time and money) - Capital, entrepreneurs have to put
- Able to put ideas into practice their own money into a business
- Could become famous - Lack of knowledge/ experience
- Maybe profitable - Lost income from not being an
- Able to make use of personal employee of another company
interests/ skills
Characteristics of Entrepreneurs:
,Posted by: Khadija Awad
1- hard working (puts in long hours and fewer holidays)
2- risk taker
3- creative (has new and different ideas)
4- optimistic
5- self-confident
6- innovative
7- independent (being able to work on their own)
8- effective communicator
BUSINESS PLANS
What are they?: a document containing the business objectives and important details, for banks
to be able to give out loans
What does the plan ask for?: a description of the business, product and service, the market,
business location and how products will reach customers, organisation structure and
management, financial info and business strategy
WHY DO GOVERNMENTS SUPPORT BUSINESS START-UPS:
How do businesses get support from governments?
● Ideas and help: organising training for entrepreneurs
● Premises: provide low costs premises to start-up businesses
● Finance: loans and grants
● Labour: grants business to train employees
● Research: encourage research
Comparing business sizes:
Useful to: investors, governments, banks, workers and competitors
Methods: by numbers of workers employed, value of output, sales or capital employed
, Posted by: Khadija Awad
Capital Employed: the total value of capital used in the business
DIFFERENT WAYS A BUSINESS CAN GROW:
1- Internal Growth (organic): occurs when a business expands its existing operations
2- External Growth: when a business takes over or merges with another business
merger: when the owners of two businesses takeover (acquisition): one business buys out
agree to join and make it one another business and becomes a part of it
Types of External Growth:
- horizontal merger: when one firm merges/ takes over another in the same industry at
the same stage of production
- vertical merger (vertical integration): when one business merges/ takes over another in
the same industry but at different stages of production
- conglomerate merger (diversification): when one business merges/ takes over a business
in a completely different business
Why do some businesses remain small?
1- the type of business/ industry
2- market size
3- owner’s objectives
CAUSES OF BUSINESS FAILURE:
- lack of management skills
- changes in the business environment
- liquidity problems/ poor financial management
- overexposure
Types of businesses
There are five forms of businesses in the PRIVATE sector
SOLE TRADERS
● A business owned and operated by one person
● Most common, because of the few legal requirements
Advantages:
no legalities, receives all profit, has freedom of choice and independence, full control
of a good or service.
Why is added value important?: because sales revenue is greater than the cost of materials
bought in by the business. This means that the business:
● Can pay labour costs, management expenses and costs like advertising and power
● May be able to make a profit
● Wages and rent are part of added value.
● Profit is the money left over after paying wages and rent from the added value
How is value-added:
1- Adding extra features to the product
2- Branding and ensuring good quality
3- Improved design and having a unique selling point (USP)
SECTORS:
PRIMARY SECTOR:
The primary sector of industry Riextracts natural resources of the Earth to produce raw
materials used by other businesses eg. farming, fishing, forestry, extraction of natural materials
SECONDARY SECTOR:
Manufacturers goods using raw materials provided by the primary sector eg. building,
constructing, car manufacturing
TERTIARY SECTOR:
Provides services to consumers and other sectors of industry eg. transport, banking, retail,
hotels
What is deindustrialisation?: when there is a decline in the importance of the secondary
(manufacturing) sector of industry in a country
Why does the importance of sectors change?:
- sources of primary products become depleted
- most developed economies losing competitiveness in manufacturing to newly
industrialised countries
- countries with higher living standards focus more on secondary and tertiary services
rather than primary
,Posted by: Khadija Awad
MIXED ECONOMY: has both public and private sectors
PUBLIC PRIVATE
- government or state-owned and - business not owned by the
controlled businesses government
- authority makes decisions about what - make their own choices about what to
to produce and charge for produce and what to charge for
- could be paid by taxes (eg. health, - they aim to run profitably
water)
PRIVATISATION:
when the government sells some of the public industry services to private owners/ private
owned companies
Advantages:
private sectors are often more effective than public
Sectors, since they run on profit, they have more
money and capital to invest with than the public sectors.
competition between private sectors can help improve
quality
Disadvantages:
could make more workers unemployed than a public sector
business to cut costs, less likely to focus
on social objectives
What are the advantages/ disadvantages of being an entrepreneur:
Advantages Disadvantages
- Independence (being able to choose - Risk (could fail if poorly planned)
how to use time and money) - Capital, entrepreneurs have to put
- Able to put ideas into practice their own money into a business
- Could become famous - Lack of knowledge/ experience
- Maybe profitable - Lost income from not being an
- Able to make use of personal employee of another company
interests/ skills
Characteristics of Entrepreneurs:
,Posted by: Khadija Awad
1- hard working (puts in long hours and fewer holidays)
2- risk taker
3- creative (has new and different ideas)
4- optimistic
5- self-confident
6- innovative
7- independent (being able to work on their own)
8- effective communicator
BUSINESS PLANS
What are they?: a document containing the business objectives and important details, for banks
to be able to give out loans
What does the plan ask for?: a description of the business, product and service, the market,
business location and how products will reach customers, organisation structure and
management, financial info and business strategy
WHY DO GOVERNMENTS SUPPORT BUSINESS START-UPS:
How do businesses get support from governments?
● Ideas and help: organising training for entrepreneurs
● Premises: provide low costs premises to start-up businesses
● Finance: loans and grants
● Labour: grants business to train employees
● Research: encourage research
Comparing business sizes:
Useful to: investors, governments, banks, workers and competitors
Methods: by numbers of workers employed, value of output, sales or capital employed
, Posted by: Khadija Awad
Capital Employed: the total value of capital used in the business
DIFFERENT WAYS A BUSINESS CAN GROW:
1- Internal Growth (organic): occurs when a business expands its existing operations
2- External Growth: when a business takes over or merges with another business
merger: when the owners of two businesses takeover (acquisition): one business buys out
agree to join and make it one another business and becomes a part of it
Types of External Growth:
- horizontal merger: when one firm merges/ takes over another in the same industry at
the same stage of production
- vertical merger (vertical integration): when one business merges/ takes over another in
the same industry but at different stages of production
- conglomerate merger (diversification): when one business merges/ takes over a business
in a completely different business
Why do some businesses remain small?
1- the type of business/ industry
2- market size
3- owner’s objectives
CAUSES OF BUSINESS FAILURE:
- lack of management skills
- changes in the business environment
- liquidity problems/ poor financial management
- overexposure
Types of businesses
There are five forms of businesses in the PRIVATE sector
SOLE TRADERS
● A business owned and operated by one person
● Most common, because of the few legal requirements
Advantages:
no legalities, receives all profit, has freedom of choice and independence, full control
