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Summary AS Section 1
AS summary of Section 1: Business & its Environmnet
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Unit 1: Business and its EnvironmentChapter 1: Enterprise
Business activity aims to satisfy people's needs, which requires resources.
What Do Businesses Do?
1. Identify needs and wants.
2. Produce goods and services to satisfy customers to earn a profit.
3. Purchase of resources to produce.
Factors of production= the resources needed by business to produce goods or services:
1. Land= land, and renewable and non-renewable resources.
2. Labour= manual and skilled labour (employees).
3. Capital= finance and capital goods.
4. Enterprise= risk-taking individuals.
Consumer= individual who purchases goods and services for personal use.
Customer= purchase goods and services for personal use or for an organisation.
Consumer Goods= tangible goods sold (food, washing machine,etc).
Consumer Services= non-tangible goods sold (hotel, insurance, transport,etc).
Added Value= difference between the cost of purchasing bought-in inputs (materials) and the selling
price of the finished goods.
- The value added by a business is not profit.
Adding Value= increasing the difference between the cost of bought-in inputs (materials) and the
selling price of the finished goods.
Branding= process of differentiation of a product by name, image, logo or trademark.
Economic Problem= not enough goods and services to satisfy all the needs and wants of
consumers, all at once.
Purpose of Economic Activity= provide wants whilst still leaving more to want.
Opportunity Cost= next most desired option that is given up.
Changes in Business Environment:
- New competitors (entering market). - Economic changes.
- Legal changes (new safety - Technological changes.
regulations).
Why Do Some Businesses Succeed?
- Good understanding of customer needs.
- Efficient management of operations.
- Flexible decision-making to adapt to new situations.
- Appropriate and sufficient sources of finance.
Why Do Some Businesses Fail?
- Poor record-keeping. - Poor management skills.
- Lack of cash.
Types of Businesses:
Local Business= small,exclusive, no need to expand in the country.
National Business= spread across country; no need to expand beyond home country
International Business= large scale, sells internationally.
Multinational Business= operations in more than one country.
The Role of Entrepreneurs and Intrapreneurs:
Intrapreneur= a business employee who takes direct responsibility for turning an idea into a profitable
new product or business venture.
Entrepreneur= an individual who has the idea for a new business, starts it up and carries most of the
risks but benefits from the rewards.
1
, Their role when creating and starting up a new business:
1. New idea of business. 4. Accept responsibility.
2. Create a business plan. 5. Accept risk of failure.
3. Invest.
Qualities:
- Innovative. - Leadership skills.
- Committed and self-motivated. - Self-confidence & determination.
- Multi-skilled. - Risk-takers.
Barriers to Entrepreneurship:
1. Lack of business opportunity
2. Obtaining sufficient capital (finance):
- Insufficient savings.
- No knowledge of financial support/grants available.
- No trading record.
- Poor business plan.
3. Cost of good location:
- Not close to area of biggest market potential.
- Lack of status.
- May cause family tensions.
- Difficult to separate private from work life.
4. Competition:
- From already existing businesses with more market knowledge, therefore
entrepreneurs might have to present more unusual products or offer better customer
service.
5. Lack of a customer base:
- Long-term success will depend on encouraging customers to return to purchase
products repeatedly.
Risk= can be prevented from planning and researching as it is something that will happen if the
appropriate decisions, regarding other similar businesses failure, are not taken.
- All decisions involve risks.
Uncertainty= can’t be foreseen, measured or calculated from research or planning, as it is impossible
to predict.
Benefits to An Economy from Successful Business Enterprise:
1. Employment creation
2. Economic growth= an increase in output of goods or services from a start-up business will
increase the GDP of the country.
3. Business survival and growth
4. Innovation and technological change
5. Exports: increase value of a nation’s exports and improve its international competitiveness.
6. Personal development: aid in development of useful skills and help an individual towards
self-actualisation.
7. Increased social cohesion
Role of Intrapreneurship:
- The process of encouraging risk-taking and enterprise by employees within the business to
help create and develop new opportunities.
3 Key Differences: Entrepreneur Intrapreneur
Main activity Starting up new business Developing a new project/product within an existing business
Risk Taken by entrepreneur Taken by business
Rewards To entrepreneur To business
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