Key Idea: At HL, Topic 1.1 is not just about defining business basics. Students are expected to apply concepts like needs, wants, sectors, business functions and value added to real business contexts, and explain how these ideas shape decisions, risk and opportunity.
- Business
- An organization that provides goods and/or services to satisfy customer needs and wants.
- Goods
- Tangible products that can be touched and stored.
- Services
- Intangible activities performed for customers.
- Needs
- Essentials required for survival.
- Wants
- Things people desire that improve quality of life.
- Value added
- The difference between the selling price of the output and the cost of the inputs.
Core structure (memorise)
- Businesses satisfy needs and wants by providing goods and/or services
- Businesses add value through the transformation process
- The four main business functions are HR, finance, marketing and operations
- These functions are interdependent and must work together
- Primary = extraction, secondary = manufacturing, tertiary = services, quaternary = knowledge
🏭 Business sectors: **Primary —** extraction of raw materials. **Secondary —** manufacturing and construction. **Tertiary —** provision of services. **Quaternary —** knowledge and information industries.
🧠 Why this matters: Different sectors face different costs and risks. Service businesses depend more on people and customer experience. Manufacturing businesses focus more on production efficiency and scale. Economic development often means a shift towards tertiary and quaternary activity.
What HL students should show
- Explain how value is created, not just what value added means
- Link business functions together, not as separate textbook boxes
- Apply sector differences to real business situations
- Recognise that business activity always involves both opportunity and risk
- Use terminology precisely in definitions and shorter-response questions
For HL, definitions still matter. A strong definition of a business includes goods and/or services and satisfying customer needs and wants. If one of those is missing, marks are often limited.
In analytical responses, move beyond stating the sector. Explain what that means for staffing, operations, costs, demand or customer expectations.
Important: Common HL trap: students define terms correctly but fail to connect them. For example, they name the four business functions without showing how poor coordination between them creates business problems.
- Use the exact business term correctly
- Give a precise definition if needed
- Apply it to the business or context
- Explain why it matters
- Where possible, link it to value creation, risk or business decisions