Edexcel IGCSE Business: Classification of businesses and location decisions (4BS1) – Revision Notes

These notes condense sections 1.3 and 1.4 of the Pearson Edexcel International GCSE in Business (4BS1) specification, Issue 2, February 2026: the three sectors (1.3.1) and the factors in location decisions and relocation (1.4.1). For full explanations and worked examples, use the study guide. Then test yourself with the practice questions.

Course links: the Business hub, the printable checklist and the free diagnostics.

1. The three sectors (1.3.1)

Sector	Specification wording	Typical activities	Clue verbs
Primary	Extracting raw materials from the earth	Farming, fishing, forestry, mining	grows, catches, digs, drills
Secondary	Converting raw materials into finished or semi-finished goods	Manufacturing, construction, food processing	makes, builds, assembles, refines
Tertiary	Provision of a wide variety of services	Retail, banking, transport, teaching, repairs	sells, delivers, advises, cleans

Must-know distinctions:

• A semi-finished good (steel sheet, sawn timber, flour) is still secondary output. It is an input for another business.
• A business that grows tomatoes is primary. One that turns them into sauce is secondary. One that sells the sauce is tertiary.
• One business can sit in several sectors. Classify each activity, not the company name.
• Sector share of revenue = revenue from that sector / total revenue x 100.

Method in steps for a sector-share question:

1. Add the revenues to find the total.
2. Divide each sector’s revenue by the total.
3. Multiply by 100 and check the shares add to 100%.
4. Say what the biggest share means for the business.

2. Location factors at a glance (1.4.1)

Factor	Why it can pull a business towards a site	Why it can push it away
Proximity to market	Easy access for customers, low delivery cost, fresh goods	Rent and rates in busy areas are high
Proximity to labour	Easy recruitment, right skills, lower wage costs	Competition for staff can raise wages; remote sites mean transport or relocation of staff
Proximity to materials	Lower transport cost, less waste or spoilage, reliable supply	Remote or hard-to-reach supply sites; the market may be far away
Proximity to competitors	Clusters attract customers and skilled workers	Customers can compare and switch; price pressure
Nature of the business activity	Matches the site to what the activity needs (resource, space, footfall)	Some activities have almost no choice (mining)
Internet / e-commerce	Cheaper premises, wider market	Delivery and website costs; customers who want to see goods
Legal controls	Clear rules, protected neighbourhoods	Restrictions on use of land, noise, pollution; extra compliance costs
Trade blocs	Free or easier trade with members; no tariff inside	Tariffs on goods coming from outside

Which factor leads?

Use this guide to get started, then check it against the case.

If the business…	The factor that often leads
Handles heavy, bulky or perishable inputs	Materials
Sells to walk-in customers	Market
Needs particular skills in quantity	Labour
Extracts a resource	Nature of the activity
Sells small, light goods online	Internet (cheaper premises)
Exports to a bloc with a tariff	Trade bloc

These are tendencies, not rules. A bulky product with a very small customer base may be driven by the market.

3. The internet and location (1.4.1)

• E-commerce is buying and selling online.
• Benefits: lower-cost premises, wider market, longer opening hours, lower staffing at the point of sale.
• Costs and limits: delivery, packaging, returns, website upkeep, no chance to touch or try goods, dependence on carriers.
• Fixed premises still matter when customers want to see goods, receive a personal service or collect quickly.
• Many businesses combine both.

Quick reminder calculation: a business ships 9,000 online orders at £3.20 delivery each. Delivery cost = 9,000 x 3.20 = £28,800.

4. Legal controls and trade blocs (1.4.1)

• Legal controls: rules that limit where or how a business may operate (use of land, noise, pollution, safety). Effects: a site may be unavailable, costs may rise, or a firm may be pushed away from housing. Describe the effect. Do not invent a statute.
• Trade bloc: a group of countries that agree to reduce trade barriers between themselves. This is the standard form of the definition. Inside the bloc, trade is easier. Outsiders may pay a tariff (a tax on imports).
• Reminder calculation: a 10% tariff on £80,000 of imports = 0.10 x 80,000 = £8,000.

Compare the cost of locating inside and outside a bloc by adding the tariff to the outside cost, then comparing totals.

5. Relocation (1.4.1)

Reasons a business may move	One-off costs and risks
Rent or other costs have risen	Moving and fitting-out costs
Business has outgrown its premises	Disruption to production and sales
Customers, labour or materials are now elsewhere	Staff who will not move
A new legal control restricts the site	Customers who cannot find the new site
A trade bloc change affects tariffs	Possible higher transport costs

Method for a relocation decision:

1. Find the annual saving (or extra cost) of the new site.
2. Subtract extra costs, such as transport.
3. Compare the one-off cost with the annual net saving: one-off cost / annual net saving = years to recover.
4. Weigh the non-financial effects (staff, customers, risk).
5. Make a decision and give a reason.

Command words for this topic

The specification’s command-word table describes the answers as follows.

Command word	What the table says	How to use it here
Define	define a term from the specification content	One clear sentence, such as the sector definitions above
Outline	two linked points, placed in context	Link cause and effect in the case
Explain	a statement of fact with two expansion points, no context	General statement, then two developments
Analyse	extended answer, placed in context	Chain of reasoning using case facts
Justify	extended answer recommending one of two options	Choose, then say why the other is weaker
Evaluate	extended answer reaching a supported conclusion	Weigh both sides, then judge

Worked reminders

Comparing two sites. A bakery expects site P to cost £92,000 a year and bring in £120,000, and site Q to cost £81,000 and bring in £104,000. Profit at P = 120,000 - 92,000 = £28,000. Profit at Q = 104,000 - 81,000 = £23,000. P is £5,000 better on the figures. Then ask what the forecasts assume and what the figures leave out.

Reading a trade-off. Cheap rent far from customers lowers one cost but may cut revenue and raise delivery cost. Always follow a cost saving through to its knock-on effect.

Writing an analyse paragraph. Point (the factor), evidence (a fact from the case), consequence (what it does to cost, sales or convenience), link (why that matters for the decision).

Quick self-test

1. Which sector does an oil-extraction company belong to?
2. Which sector does a car assembly plant belong to?
3. Which sector does an accountancy firm belong to?
4. A firm has total revenue of £150,000, of which £45,000 comes from farming. What percentage is primary?
5. Name the four proximity factors in 1.4.1.
6. Why is the location of a quarry largely fixed?
7. A town’s wage is £18,000 and another’s is £15,300. Calculate the percentage fall in wage cost.
8. State one cost that rises when a shop moves online.
9. A bloc charges a 10% tariff on goods worth £80,000. State the tariff.
10. A move costs £90,000 and saves £30,000 a year net. How many years to recover the cost?
11. Define “trade bloc”.

Answers

1. Primary.
2. Secondary.
3. Tertiary.
4. 45,000 / 150,000 x 100 = 30%.
5. Market, labour, materials, competitors.
6. The activity must take place where the resource is.
7. (18,000 - 15,300) / 18,000 x 100 = 15%.
8. Delivery (or packaging, returns, or website upkeep).
9. £8,000.
10. 90,000 / 30,000 = 3 years.
11. A group of countries that agree to reduce barriers to trade between themselves.

Where marks are usually lost

• Giving a sector without a reason when the question asks you to link the activity to its definition.
• Classifying the company by its name rather than the activity described.
• Listing factors without saying how they change cost, revenue or convenience for the business in the case.
• Treating competitors as only a threat.
• Writing that the internet means a business needs no premises.
• Forgetting to add the tariff to the outside cost before comparing.
• Leaving out one-off costs in a relocation decision.
• Stopping at figures in an evaluate or justify answer, with no judgement.
• Describing legal controls in detail that is not in the question, or naming a law you are unsure of.

Frequently asked questions

What are the primary, secondary and tertiary sectors? The 4BS1 specification describes primary as extracting raw materials from the earth, secondary as converting raw materials into finished or semi-finished goods, and tertiary as the provision of a wide variety of services.

Is being close to competitors good or bad for a business? It can be both. A cluster of similar businesses may draw customers and skilled workers to an area, but it also means sharing customers and facing price competition.

How does e-commerce affect location decisions? An online seller can use cheaper premises away from busy areas and reach customers in other regions without opening shops. Costs shift to delivery, packaging, website upkeep and returns, and many businesses keep fixed premises as well.

What is a trade bloc? In the standard form, a trade bloc is a group of countries that agree to reduce barriers to trade between them. Producing inside a bloc can avoid tariffs on goods sold to its members.

Official syllabus

Pearson Edexcel International GCSE in Business (4BS1), Specification, Issue 2, February 2026, published by Pearson Education Limited. Topic 1: Business activity and influences on business, sections 1.3 Classification of businesses and 1.4 Decisions on location.