✦ 1.3 Paper 1 · 0450 Difficulty: Medium

Unit 1: Business and its Environment
Enterprise, Business Growth & Size

Free CAIE IGCSE Business Studies topical past-paper practice on entrepreneurs, business plans, start-ups, measuring business size, business failure, and internal or external growth.

12Papers

2–6Marks per Q

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Examiner tip — use the business context in every answer

For enterprise and growth questions, link your point to the case study: the entrepreneur, the start-up, the method of growth, or the business size. For 6-mark questions, give two developed points and finish with a clear justified judgement.

Key Concepts to Revise

Entrepreneurship

An entrepreneur organises resources, takes risks and starts a business.

Common characteristics include creativity, risk-taking, determination, leadership and self-confidence.

Start-up Support

Governments may support start-ups with grants, training, advice, low-interest loans or tax incentives.

This can increase employment, output and innovation.

Business Plans

A business plan helps set objectives, forecast finance and reduce the risk of failure.

It can also help persuade lenders or investors to provide finance.

Measuring Size

Size can be measured by number of employees, value of sales, capital employed, market share or output.

No single measure is perfect for every business.

Business Growth

Internal growth means expanding using the business’s own resources.

External growth means growing by merger, takeover or joint venture.

Business Failure

New businesses may fail because of poor management, lack of experience, poor location, strong competition or weak cash flow.

Always apply the reason to the business in the case study.

Past Paper Questions

12 papers

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0450/13/M/J/2025

Unit 1.3 · Enterprise, Business Growth & Size

Case Study

Jonathon is a sole trader. He owns a shop selling office equipment including printers. To encourage sales Jonathon allows customers 4 weeks to pay for the office equipment. Jonathon thinks his business is likely to remain small. He knows managing cash flow is important for his business and he has prepared a cash flow forecast. An extract is shown in Table 2.1.

Extract from Jonathon’s cash flow forecast July – September 2025 ($000)
	July	August	September
Cash inflow	60	80	Y
Cash outflow	90	95	70
Net cash flow	(30)	X	20
Opening balance	20	(10)	(25)
Closing balance	(10)	(25)	(5)

Table 2.1

(a)

Identify two ways to measure the size of a business.

[2]

Point 1:

Point 2:

(c)

Outline two reasons, other than finance, why Jonathon’s business is likely to remain small.

[4]

Reason / way 1:

Outline:

Reason / way 2:

Outline:

0450/12/M/J/2025

Unit 1.3 · Enterprise, Business Growth & Size

Case Study

Hal wants to be a successful entrepreneur. He plans to leave his job to start up a bakery. The bakery will operate in the private sector. The business will have many stakeholder groups. Hal has been told it is important for a new business to select an appropriate source of start-up capital. He also knows new businesses are at a greater risk of failure.

(d)

Explain two characteristics Hal will need to become a successful entrepreneur.

[6]

Point 1:

Explanation:

Point 2:

Explanation:

0450/11/M/J/2025

Unit 1.3 · Enterprise, Business Growth & Size

Case Study 1

PKN manufactures glass. Contributing to sustainable development is important to the business. PKN has factories in 30 countries. It has 27 000 employees. The Managing Director knows PKN has benefited from globalisation. She plans to expand the business using external growth. Retained profit is one source of finance a business could use to fund expansion. Some of PKN’s directors are concerned about possible diseconomies of scale as the business grows.

(a)

Identify two methods of external growth a business might use.

[2]

Point 1:

Point 2:

Case Study 2

Brendan wants to be a successful entrepreneur. He plans to start up a flower shop using government support. Brendan’s brother has offered to form a business partnership with him. Brendan knows it is important for a new business to use a suitable pricing method. He has already identified ways the business can increase added value. Brendan wants to know how an economic boom might affect his business.

(b)

Identify two ways a government can support business start-ups.

[2]

Point 1:

Point 2:

0450/12/F/M/2025

Unit 1.3 · Enterprise, Business Growth & Size

Case Study

Rachel’s business produces and sells chocolate bars. Quality is important. Rachel is a sole trader who received government support when she started up her business. The business operates in a competitive market. Rachel is considering ways to increase sales of her best-selling product. She is also planning to introduce a new chocolate bar. Rachel knows deciding which pricing method to use for a new product is important.

(b)

Identify two ways a government can support business start-ups.

[2]

Point 1:

Point 2:

0450/13/O/N/2024

Unit 1.3 · Enterprise, Business Growth & Size

Case Study

Ramon is an entrepreneur. He plans to start up a home tutoring service to provide students with extra help to learn maths. Ramon is considering buying a franchise. He has prepared a business plan but is concerned about how an increase in the rate of inflation might affect his business. Ramon wants to know whether crowdfunding is the best source of finance for a start-up business to use.

(b)

Identify two characteristics of a successful entrepreneur.

[2]

Point 1:

Point 2:

(c)

Outline two ways a business plan might help Ramon.

[4]

Reason / way 1:

Outline:

Reason / way 2:

Outline:

0450/12/O/N/2024

Unit 1.3 · Enterprise, Business Growth & Size

Case Study

Avtar owns a car repair business which operates in the private sector. It is a small business with 2 full-time employees. Avtar wants to find out the best way for a business to increase added value. Avtar’s business needs finance for many reasons. Avtar wants to know how an economic recession might affect his business.

(a)

Identify two features of a private sector business.

[2]

Point 1:

Point 2:

0450/11/O/N/2024

Unit 1.3 · Enterprise, Business Growth & Size

Case Study

Mitchell is an entrepreneur. He wants to start up a business selling books. As part of his business plan Mitchell has carried out some market research. An extract is shown in Fig. 2.1. Mitchell will use microfinance as a source of finance. He wants to know whether the opportunities of using ecommerce for a new business are greater than the threats.

(a)

Define ‘entrepreneur’.

[2]

(b)

Define ‘business plan’.

[2]

0450/12/M/J/2024

Unit 1.3 · Enterprise, Business Growth & Size

Case Study 1

ADN is a food retailer. It has 5 shops and 300 full-time employees. All ADN’s employees receive off-the-job training. ADN has a tall hierarchical structure. Managers have a narrow span of control and all use an autocratic leadership style. ADN’s directors are planning to expand the business and cannot decide whether it is better for a business to use internal growth or external growth.

(e)

Do you think it is better for a business to use internal growth or external growth when planning to expand? Justify your answer.

[6]

Point 1:

Explanation:

Point 2:

Explanation:

Justified answer:

Case Study 2

Nicky wants to be a successful entrepreneur. She plans to start up a travel business specialising in walking holidays. Nicky will be operating in a niche market. She is preparing a business plan to help with her decision-making. Nicky has been told government support is available for business start-ups. She knows building customer relationships will be important.

(a)

Identify two reasons why a government might support business start-ups.

[2]

Point 1:

Point 2:

(e)

Explain two characteristics of a successful entrepreneur. Which characteristic is likely to be the most important? Justify your answer.

[6]

Point 1:

Explanation:

Point 2:

Explanation:

Justified answer:

Case Study 3

AH is an insurance business. It operates in a competitive market. AH has 1000 employees including 50 supervisors. The supervisors use an autocratic leadership style. AH currently has a 5% market share and is planning to take over a competitor. The Managing Director is considering how to communicate with AH’s employees about the takeover. There are many sources of finance available to fund business growth.

(c)

Outline two benefits to AH of taking over a competitor.

[4]

Reason / way 1:

Outline:

Reason / way 2:

Outline:

0450/12/F/M/2024

Unit 1.3 · Enterprise, Business Growth & Size

Case Study

WFH produces hats and sells them to a mass market. It holds a high level of inventory. The Managing Director is concerned about the liquidity of the business and has been analysing WFH’s financial statements. An extract is shown in Table 2.1. The Managing Director thinks that the business might fail. Other stakeholder groups might also be interested in WFH’s financial statements.

Extract from WFH’s financial statements ($000)
	2021	2022
Current assets	60	50
Inventory	20	30
Trade receivables	25	10
Cash	15	10
Current liabilities	20	40
Profit / loss	15	(10)

Table 2.1

(a)

Identify two possible causes of business failure.

[2]

Point 1:

Point 2:

0450/11/O/N/2023

Unit 1.3 · Enterprise, Business Growth & Size

Case Study

Desmond wants to be a successful entrepreneur. He has decided to leave his office job to start up a gardening business cutting grass and planting flowers. It will be an unincorporated business. Desmond is aware that a new business is at greater risk of failure than an established business. He has identified his business objectives for the first year. Desmond has calculated he will need $750 for his start-up capital.

(a)

Define ‘unincorporated business’.

[2]

(d)

Explain two reasons, other than lack of finance, why Desmond’s new business might be at greater risk of failure than an established business.

[6]

Point 1:

Explanation:

Point 2:

Explanation:

0450/13/M/J/2023

Unit 1.3 · Enterprise, Business Growth & Size

Case Study

Meena wants to leave her job as a teacher to become a successful entrepreneur. Her business will produce handmade jewellery. Meena knows that there is government support for business start-ups. She plans to use market research to help identify a market segment for her jewellery. Meena’s brother has offered to become her business partner but she cannot decide whether it would be better to operate as a sole trader.

(a)

Identify two ways a government might support business start-ups.

[2]

Point 1:

Point 2:

(c)

Outline two characteristics Meena will need to become a successful entrepreneur.

[4]

Reason / way 1:

Outline:

Reason / way 2:

Outline:

0450/11/M/J/2022

Unit 1.3 · Enterprise, Business Growth & Size

Case Study

Pamela is a successful entrepreneur. She is the owner of a gift shop selling celebration cards, toys and candy (sweets). When Pamela started her business 30 years ago she had no help to manage the shop. She now has 5 employees. Pamela knows maintaining customer loyalty is important. She uses competitive pricing. Most of her marketing budget is spent on sales promotion. Pamela does not use e-commerce.

(e)

Do you think being a risk-taker is a more important characteristic of a successful entrepreneur than being creative? Justify your answer.

[6]

Point 1:

Explanation:

Point 2:

Explanation:

Justified answer: