☆ U1: BUSINESS AND ITS
ENVIRONMENT -- ENTERPRISE ☆
The nature of business activity
Purpose of business activity
1. Transform inputs → outputs
a. Using the 4 factors of production: land, labour, capital, enterprise
b. Output is any g/s represented by profit
2. Use limited resources (FoP) to produce g/s that meet the n/w of customers
The concept of creating value
- This is the creation of ‘added value’
- This is the difference b/w cost and price
- Increasing this leads to ++ profit
- Each stage of production makes product more valuable
- CV =/= profit: increasing value (is costly, bc involves higher labour, for example) cost
same → more profit
The nature of economic activity, the problem of choice and
opportunity cost
- EA = requires choices b/c resources limited but n/w unlimited → most choose to produce
g/s that appeal to n/w that are more profitable (right now, PPE is most profitable)
- Opportunity cost = the benefit of the next viable option
Business environment is dynamic
- Market constantly evolving - competition, advances, policies, demographic trends
change
- Bus. must adapt or fail.
What a business needs to succeed
- FOMEC
- Finance: capital, cash flow, OC
, - Organisation: choose and combine the rest
- Marketing: consumer satisfaction through engaging experience
- Enterprise: identify market gap, fill it, assess risk and profit
- Coordination: of all of the above
Why many businesses fail early on
- Bad planning/management - business plan, leadership, hiring
- Poor marketing - too much/little hype
- Lack of capital - irregular payments, bad recordkeeping
- Bad organisation - receipts, transactions, deliveries, inventory
- Inability to adapt - financial, entrepreneurial
The role of the entrepreneur
Qualities an entrepreneur is likely to need for success
- Innovation - fill gap with niche
- Commitment - keenness for success
- Multi-skilled - able to assess qualities when hiring other positions
- Leadership - persuasion, motivation
- Confidence - abilities, risk-taking
The role of business enterprise in the development of a
business and a country
- Business
- Growth with efficiency (as outlined in qualities above)
- Country
- Increases employment in/directly
- Economic growth - GDP higher, + income tax, higher living standards → + tax
revenue for government
- Competition - sustains market by encouraging innovation
- Social cohesion lower crime rates, less conflict bc population satisfied
Social enterprise
The range and aims of social enterprises
- Range
