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Business 1.1 - the purpose and nature of business (The purpose of business…
Business 1.1 - the purpose and nature of business
The purpose of business
An organisation that produces a good or supplies a service
Good: a physical product
Service: an intangible item (something you cannot physically touch)
A business always involves people and aims to provide something that is demanded by others
Businesses provide products for customers
Customer: someone who buys the product
Consumer: someone who uses the product
A need: a basic human requirement
A want: the desire for a particular product
Reasons for starting a business
Entrepreneur: someone who starts up their own business
Willing to TAKE RISKS to start up on their own
See an opportunity and have the determination, motivation and focus to start their own business
Objectives of Entrepreneurs
Want to be their own boss and make their own decisions
Want to keep all the profit of a business for themselves
Need a job and need to earn money
Want to prove that they can do it and gain satisfaction
Want more flexible working hours
Spotted a business opportunity
Want to provide a service for others
Factors of production (CELL)
Capital: the equipment used to provide goods or services (money/machines)
Enterprise: the skills of the people involved in the business
Land: the physical land and site and other natural resources a business might use
Labour: the skills and number of employees employed by the business
Characteristics of Entrepreneurs
Hard working and determined: need to work extremely hard to get the business known and recognised which can be very exhausting
Innovative: good at spotting an opportunity and have a vision of how things could be
Risk-taker: takes risks that their idea is going to work and failure would result in a loss of time, money and emotional effor
Organised: have to organise materials, people, production, orders, deliveries and finances; so entrepreneurs need to be good at managing thing
Opportunity cost
The sacrifice we make whenever we do anything
What are you giving up?
Types of business and their basic functions
The sectors that businesses operate in
Primary sector: organisations that are at the first stage of production and use raw materials e.g. farms, fishing fleets
Secondary sector: using primary resources and converting these into products e.g. manufacturers, printers
Tertiary sector: organisations that provide services e.g. clothing stores, grocery stores
Functions of a business
Marketing function: businesses will need to think about the nature of the product, how to promote the benefits, prices and how and where customers can buy it
Operations function: activities involved in the production of the product
Human resource function: managing people e.g.recruiting and training staff)
Finance function: monitor what money is spent and where and to calculate whether the business has enough money
The dynamic nature of business
The business environment
Economic change: economic factors outside the business such as; cost of borrowing money from banks (INTEREST RATE), rate at which prices are increasing (INFLATION) and the income in the economy (GROSS DOMESTIC PRODUCT or GDP)
Legal change: new laws and regulations that may affect costs or demand for a product
Environmental expectations: what impact the business has on the environment. What resources is it using? How is it producing the product? How does it transport its product?
Technological change: new markets and products for business to use and sell