BUSINESS (As Level) SUMMARY
CHAPTER 1 : ENTERPRISE
Business activity: producing goods & services to satisfy customer’s needs & wants
and make a profit. It also involves adding value to resources such as raw materials.
Input: raw materials, other factors of production
Business: adding value by transforming / transporting a product
Output: the final product
Added value: the difference between the cost of purchasing bought-in materials and
the price the finished goods and sold for
Opportunity cost: In deciding to purchase or obtain one item, we must give up other
goods as they cannot all be purchased. The next most desired product given up
becomes the ‘lost opportunity’ or opportunity cost.
FACTORS OF PRODUCTION
What does a business need in the transformation process?
- Capital: money, things you can buy with it such as computers or machines
(capital goods)
- Land: oil, water, trees, natural resources
- Labour: people, employees
- Enterprise: the idea that brings together the other factors of production
ENTREPRENEUR
A person with an idea that is willing to take financial risk of starting and managing a
new venture business.
They must:
■ have an idea for a new business
■ invest some of their own savings and capital
■ accept the responsibility of managing the business
■ accept the possible risks of failure.
,CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR.
They must be/have:
1. Innovative: they must be able to attract customers in an innovative way &
present their business as being different from others
2. Leadership skills: the entrepreneur must lead by example, encourage people
to follow him and motivate people in the business.
3. Risk-taker: the must be willing to take risks in order to see results
4. Multi-skilled: they will have to keep records, promote and produce the
product, sell it… this requires a person who has many different qualities
CHALLENGES FACED BY ENTREPRENEURS
- Gaining capital:
This can be problem due to things such as a poor business plan to present to possible
business investors, lack of sufficient own finance, lack of trading record to give the
bank
- Competition:
A newly created business will often experience competition from older, established
businesses, with more resources and more market knowledge
- Building a customer base/recognition:
A new firm must build a customer base as quickly as possible to be able to survive.
The long- term strength of the business will depend on encouraging customers to return to
purchase products again and again. They could do this by improving the service,sales…
- Suitable location:
When starting a business we want to keep all fixed costs as low as possible to increase
the chances of survival. The cost and position of the location chosen could have a big
impact on the business entrepreneur’s chance of success.
WHY DO BUSINESS OFTEN FAIL?
● Lack of record keeping:
Entrepreneurs must pay attention to every detail such as when the next
delivery is,how many hours that employee worked...
● Lack of cash and working capital:
Without sufficient working capital, the business may be unable to buy more supplies,
or pay suppliers to offer credit to important customers.
● Poor management skills:
Potential entrepreneurs are encouraged to attend courses to gain some skills
such as leadership skills to ensure they know how to manage a business before
putting their capital at risk
● Changes in the business environment:
, If new competitors, legal changes, economic changes...occur the business may
fail
TYPES OF ENTREPRENEURIAL BUSINESSES
Primary sector: fishing, market gardening…
Secondary sector: jewellery making, craft manufacturing,building trades…
Tertiary sector: cafes, restaurants,shops, hairdressing…
IMPACT OF ENTERPRISE ON COUNTRY’S ECONOMY
- Employment creation: if the business grows and expands jobs will be created
- Economic growth: any increase in the output and goods of a business the GDP
will increase
- Firm’s survival & growth: although some of new brands fail,some grow and
become very important to the country
- Innovation & technological change: most new businesses try to be original,
this created dynamism to an economy
- Exports: businesses that expand will expand their operations to the export
market and therefore increase the value of national exports
- Personal development: starting a business can help individuals to
self-actualisation
- Increased social cohesion:unemployment often leads to social problems, if
there is more people employed this will reduce
SOCIAL ENTERPRISE
A business with mainly social objectives that reinvests most of its money into
benefiting society rather than maximising returns to owners
- OBJECTIVES (triple bottom line)
1. Economic: make a profit to reinvest back to the business & provide
some return to owners
2. Social: provide jobs and support for locals, often disadvantaged
communities
3. Environmental: to manage the business in an environmentally
sustainable way
, CHAPTER 2: BUSINESS STRUCTURE
CLASSIFICATION OF BUSINESS ACTIVITY
Primary sector business activity
Secondary sector business activity
Tertiary sector business activity
CHANGES IN BUSINESS ACTIVITY
1) The importance of each sector changes over time
The relative importance of each sector is measured in terms either of employment
levels or of output levels as a proportion of the whole economy. When secondary and
sector develops in countries (industrialisation) this brings benefits such as an
increase in the GDP, lower imports and higher exports and some problems like many
people moving from countryside to towns
2) In developed economies, the situation is reversed. There is a decline in the
importance of secondary-sector activity and an increase in the tertiary sector.
(deindustrialisation)
3) The importance of each sector varies significantly between different
economies
PUBLIC & PRIVATE SECTORS
Public sector: organisations controlled by the central or local government
Private sector: businesses owned and controlled by individuals or groups of
individuals
In nearly every country with a mixed economy (economic resources are controlled
and owned by both sectors), most business activity is in the private sector.
Those economies that are closest to a free-market (economic resources are largely
owned by the private sector with very little state intervention) system have very
small public sectors. Those countries with central planning command economies
(economic resources are owned and planned by the state) will have very few
businesses in the private sector.
