Unit 1: Business Activity
Business activity involves producing goods or services to meet customer needs and wants while making a profit.
Spotting an opportunity: In 1998, three Cambridge graduates noticed that there were no healthy, natural smoothies available in UK supermarkets.
Developing the idea: They created fruit smoothies with no additives, testing their products at a music festival by asking customers to put empty bottles in 'yes' or 'no' bins.
Satisfying customer needs: They provided busy consumers with a convenient, healthy drink option, growing into a £100+ million business before being sold to Coca-Cola.
An entrepreneur is someone who takes the risk of starting and running a business enterprise. According to the OCR specification, entrepreneurs possess specific characteristics:
Creativity: Dyson invented the bagless vacuum cleaner using cyclone technology, a completely new approach to vacuum design.
Risk taking: He spent 15 years developing his product and created 5,127 prototypes, risking his savings and home.
Determination: Despite being rejected by major manufacturers, he continued developing his product and eventually set up his own company.
Confidence: He believed his product was superior to existing vacuums and persisted even when others doubted him. Today, Dyson is a multi-billion pound company.
Risk refers to the possibility of losing money, time, or effort when starting a business. Reward is the potential benefit or profit that can be gained if the business succeeds.
Common risks entrepreneurs face:
Potential rewards for entrepreneurs:
Risk: Paul Lindley left his secure job as a TV executive to start Ella's Kitchen, a baby food business. He invested his own money and faced uncertainty about whether parents would buy organic baby food in pouches.
Reward: The business became hugely successful, growing to over £100 million in sales within 10 years. In 2013, he sold the business for £200 million to a US company, demonstrating the potential rewards of successful entrepreneurship.
A business plan is a written document that describes a business's objectives and how it intends to achieve them. It is essential for new and existing businesses.
Planning business activity allows entrepreneurs to think carefully about all aspects of their business before committing significant time and money. The OCR specification identifies specific purposes for business planning.
Business planning helps reduce risk by forcing entrepreneurs to research and think through potential problems before they occur. By planning ahead, businesses can identify weaknesses in their idea and make changes before investing heavily.
BrewDog, the Scottish craft beer company, used detailed business planning to reduce risk when expanding internationally. Their business plans included market research on beer preferences in different countries, helping them avoid launching unsuitable products. This planning helped them identify that their beer styles needed adapting for some markets, preventing costly failures. Today they operate bars in over 100 locations worldwide.
A well-prepared business plan increases the chances of success by providing clear goals and a roadmap to achieve them. It helps entrepreneurs stay focused and make informed decisions rather than responding reactively to problems.
Greggs, the UK bakery chain, creates detailed business plans for every new store location. Their plans include sales forecasts, staffing requirements, and local market analysis. This systematic planning approach has helped them maintain consistent quality and profitability across over 2,300 UK stores, contributing to their sustained success and growth.
Business planning involves market research to identify target customers, understand their needs, and assess competition. This ensures the business focuses on customers who are most likely to buy their products or services.
Gymshark, founded by Ben Francis as a teenager, used business planning to identify their target market: young fitness enthusiasts who wanted fashionable, affordable gym wear. Their business plan identified that existing gym clothing was either too expensive or unfashionable. By clearly defining this market through planning, they targeted social media marketing specifically at 16-30 year olds, helping them grow from a bedroom startup to a business valued at over £1 billion.
Banks and investors require a business plan before providing funding. The plan demonstrates that the entrepreneur has thought carefully about the business and can convince lenders that the business will be able to repay loans or generate returns on investment.
Gousto, the recipe box delivery company, needed significant funding to start operations. Their detailed business plan, which included financial projections, market size data, and a clear operational strategy, helped them secure £200,000 initial investment in 2012. The quality of their business planning convinced investors of the business's potential, and the company has since raised over £300 million in total funding. Without a strong business plan, they would not have obtained this finance.
Business planning requires entrepreneurs to list all the resources needed to run the business, including equipment, premises, staff, suppliers, and materials. This prevents businesses from starting without essential resources.
When Pret A Manger plans new store openings, their business plan identifies all required resources: kitchen equipment, refrigeration units, staff numbers, supply chain logistics, and ingredient suppliers. For example, their plans specify they need premises with adequate kitchen space for fresh food preparation, specific equipment for sandwich making, and a reliable supply chain for fresh ingredients delivered daily. This detailed resource planning has enabled their consistent quality across over 550 locations.
A business plan sets out clear aims (broad goals) and objectives (specific, measurable targets). These provide direction for the business and allow progress to be measured. The plan explains how these aims and objectives will be achieved.
Tesco uses business planning to achieve its aims and objectives. For example, when they set an objective to increase online grocery sales, their business plan detailed specific actions: investing in delivery vans, building automated warehouses, developing a mobile app, and training staff. Their plan included measurable objectives such as "increase online sales by 15% within two years." By following this structured plan, they successfully grew their online business and are now the UK's largest online grocery retailer.
Maya is an 18-year-old entrepreneur who wants to start a business selling handmade candles made from natural soy wax. She noticed that many candles in shops contain harmful chemicals and come in non-recyclable packaging. Maya is creative and has designed unique candle holders from recycled glass bottles. She has saved £3,000 from her part-time job to invest in the business.
Maya has spent two months developing her business idea. She has researched competitors and found that eco-friendly candles typically sell for £15-25 each in local gift shops and online. She plans to sell her candles through a website and at local craft markets.
Maya is determined to make her business succeed but is worried about the risks involved. Her parents have suggested she should write a business plan before investing her savings. Maya has never written a business plan before and wonders whether it is necessary. She believes she has researched her idea thoroughly and is confident customers will buy her products because they are environmentally friendly.
AO1A: Knowledge - Recall
Creativity and determination.
Marking Guidance:
This response correctly identifies two characteristics from the OCR specification. Award 1 mark for each correct characteristic identified (maximum 2 marks).
Other acceptable answers from the specification:
Note: Any two characteristics from the specification list (creativity, risk taking, determination, confidence) would receive full marks.
AO1B: Knowledge and Understanding + AO2: Application
A business plan will help Maya identify the resources her business needs to operate, such as equipment for making candles and materials like soy wax and recycled glass bottles, which will prevent her from starting the business without everything she needs.
Marking Guidance:
Knowledge (1 mark): The response shows clear understanding of how business planning identifies resources needed to operate.
Application (1 mark): The response applies this to Maya's specific situation by referencing her candle-making context (soy wax, recycled glass bottles).
Why this achieves full marks:
Other acceptable responses could focus on:
Note: To achieve application marks, responses must reference specific details from Maya's case study, not just general business planning benefits.
AO1B: Knowledge and Understanding + AO2: Application + AO3A: Analysis
A business plan will help Maya reduce risk by identifying potential problems before she invests her £3,000 savings. This means she can research whether there is sufficient demand for eco-friendly candles at craft markets and whether her pricing of £15-25 will cover her costs and generate profit. This will prevent her from losing her entire savings if the business fails, which is important as she has worked hard in her part-time job to save this money.
A business plan helps businesses. Maya could write down her ideas and this would help her think about her candles. She would understand her business better and make better decisions. This would help Maya's Eco Candles succeed because planning is important.
Response A Marking:
3/3 marksAO1B - Knowledge (1 mark): Clear, accurate understanding of how business planning reduces risk.
AO2 - Application (1 mark): Excellent use of case study context - references Maya's £3,000 savings, craft markets, eco-friendly candles, and pricing of £15-25.
AO3A - Analysis (1 mark): Develops a clear chain of reasoning showing cause and effect - how planning leads to research, which prevents loss of savings.
Response B Marking:
0/3 marksAO1B - Knowledge (0 marks): The understanding is too vague and inaccurate. Stating "helps businesses" and "planning is important" does not demonstrate specific knowledge of business planning purposes from the specification.
Critical Point: Because AO1B has not been achieved (0 marks), no other marks can be awarded, even if application or analysis were present.
AO2 - Application (0 marks): While "Maya's Eco Candles" is mentioned, there is no meaningful use of context from the case study.
AO3A - Analysis (0 marks): No developed chain of reasoning present.
Key Learning Point:
For analyse questions, you must first demonstrate accurate knowledge and understanding (AO1B). Without this foundation, no marks can be awarded for application or analysis, regardless of how good those elements might be. Vague or inaccurate knowledge results in zero marks for the entire question.
To achieve full marks on analyse questions: