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The Purpose of Businesses - Coggle Diagram
The Purpose of Businesses
The purpose of a business
Goods are physical products a business sells to customer, such as a Playstation console or Coca Cola soft drinks
Services are
intangible
items that a business provides to a customer. An example is Snapchat- who provide a digital platform for people to interact with eachother.
Some businesses exist to sell products or services to customers, these are called (B2C- business to customer) while other businesses exist sell to other businesses (B2B- business to business).
Some businesses provide both a good and service, such as restaurants, who provide goods in the form of food and a service in the form of waiters and waitresses as well as the atmosphere.
Customer need and wants
Customers' needs are things that people cannot live without. For example Severn Trent provides water to people's homes in the United Kingdom.
Customers' wants are products and services that people don't need but would like to have.
Some businesses exist to benefit society(not-for-profit organisations)
Some exist to distribute goods- they buy products from manufacturers and sell these goods on to other businesses or customers
Some exist to provide a good or service- An entrepreneur starts to sell a good or service because they think people would want to buy
The three main sectors
The primary sector produces raw materials
. These are natural resources that can be used to produce goods or provide services
The secondary sector manufactures goods
. Businesses in this sector transform raw materials into finished goods
The tertiary sector exists to provide services
- such as healthcare
Enterprise
There are two common definitions for the word
enterprise
1) A business or organisation
2) The qualities that allow an entrepreneur to take advantage of business opportunities
Businesses face
constantly-changing environments
- the business environment is characterised by:
1) Technological advancements
2) The economy
3) Legislation
4) Environmental expectations
Entrepreneurs face a lot of risks when starting a business for the following reasons:
Risk of failure (most new companies fail in their early days)
Financial loss (starting a new business often requires a lot of investment, meaning there is likely to be a financial loss for the entrepreneur)
Lack of security (when starting a business, often entrepreneurs leave their job, meaning there is a loss of security they would have had with their job in terms of a stable wage and salary. If the business makes no profit, this makes it harder for the entrepreneur to live comfortably)
Entrepreneurs can benefit from great rewards such as:
Being their own boss
Dissatisfaction with current job
To pursue an interest
Financial reward
Entrepreneurs must have certain qualities such as:
Hardworking
Organised
Innovative
Show a willingness to take risk
Factors of production
C
- capital(the equipment, factories and offices that help supply the goods or services)
E
- Enterprise (the people who take risks and create a business from the factors of production)
L
- Land (the natural resources available for production)
L
- Labour (the people that contribute to the process if supplying the product or service)
Opportunity cost
Opportunity cost is described as the
loss
of other alternatives when one is chosen. It is the "value of the next best alternative"