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    1 Understanding business activity


    • Scenario Pack

      Each Scenario Pack provides a lesson plan and resources based on a business scenario to actively engage your learners in thinking about, justifying, analysing and evaluating decisions.


    • This video contains timed elements to help learners work through the activity.
      Once you have started the video you can leave it to run from start to finish, allowing you to facilitate.
    • show/hide  Video transcript
      Hello, my name is Jane. I set up my business ‘The Natural World’ two years ago as a sole trader. I make and sell cosmetics and skin care products. I use a number of natural essential oils in my products, walnut oil being one of them, and sourcing ingredients from reputable and reliable suppliers is important to my success. I have a number of important decisions to make and need your help in making them.

      I currently make all my products at home but I need suitable premises if I am to expand production. I am unsure whether I should rent bigger premises just for more manufacturing space, look for somewhere I can manufacture that also has retail space or find separate premises to manufacture and then retail in an existing shop. What do you think?

      If I am to expand my business, I will need to employ people to help me with the extra production. I’m trying to decide how many people I should employ.

      Now you have decided how many people I should employ to start with, I need some advice on where I should advertise the jobs. I can’t decide between local newspapers, job websites or to use a recruitment agency. What do you think?

      As production will increase, I need to purchase some new and additional equipment. I need to decide how best to finance it. Depending on how much the equipment will cost, I could use retained profit from the last year, or maybe hire purchase or a business bank loan.

      It’s been six months since Jane decided she needed different premises and workers to help her. Some external factors have started to affect the local economy and business environment in which she operates. She needs your help.

      There has been drought and one of the essential oils I import, walnut oil, is now in short supply. This has increased my costs as the price of the oil has increased and I don’t know what to do. Do I pass the increase in cost onto my customers by charging a higher selling price for my products, try to absorb the cost myself or try and find an alternative oil. Please help me with my decision making

      It’s been a busy week and one of my employees has broken their arm playing sport. They’ll be off for six week and we have a big order to meet, and I’m not sure how best to cover his workload. Do I try and do the additional work myself, or perhaps I could see if the other employees would like some overtime. The alternative of course, is to ask a recruitment agency to find me a temporary worker.

      We’re in a recession and sales have started to slow down. People just don’t have the money to spend on luxury goods at the moment. I need to take action to help boost sales. Should I increase my advertising and marketing spend to raise more awareness, introduce a value range using cheaper oils so I can sell at a lower price or change to a cheaper supplier so my costs are reduced?

      Things are starting to improve and the economy is growing again. I have noticed that an environmental pressure group are trying to persuade businesses to use less plastic in their packaging. I am concerned about getting negative publicity and I do want to do my bit for the environment. I need to think about changing the way my products are packaged.

      I’ve just heard on the news that a new quota has been imposed on one of the essential oils imported from overseas. This means there is a limit on how much of this oil is available. It is a key ingredient and I don’t know what to do. Should I look for a substitute oil, make fewer products or create a new version combining it with another oil?

      My employees work hard but I do need to increase their productivity still. I’m just not sure which is the best way of doing this is. I could start using the piece rate system, or change their working methods to improve efficiency. Maybe I could involve them more and encourage them to suggest ideas?


    • Quiz

      You can use the quiz below to help your learners to identify areas of weakness that they may need to develop.


    • Test Maker
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    • Test Maker is an online service that makes it easy for you to create high-quality, customised test papers for your learners using Cambridge questions.

      Test Maker is currently available for Cambridge IGCSE Business Studies 0450, but although the grading differs for Cambridge IGCSE (9-1) syllabuses, the questions are valid for equivalent Cambridge IGCSE (9-1) and O Level syllabuses.

      Test Maker is available to all Cambridge schools through the Extra Services section of the School Support Hub.


    • Topic questions

      The topic questions have been compiled from a number of past papers. You can use them to formatively assess your learners' understanding of this topic. The mark scheme for each question is provided at the end of the document.