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EVERYTHING YOU WILL EVER NEED TO KNOW ABOUT BUSINESS
- Course
- Business (BUS101)
- Institution
- Drexel University
Everything about business
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BUSINESSBusiness Activity :
The four functions of business:
1. Finance
2. Human resourcesBreak even
3. Marketing
4. Operations (production)
Tangible: a physical thing or object that a company is selling
Intangible: a service that is provided from a company
Goods: items (tangible)
Service: something that is being done for you (intangible)
Scarce: a limited amount of a certain item
Added value: the difference between the price of the finished product/service and the cost involved in making it
Opportunity cost: a benefit, profit, or value of something that must be given up to acquire or achieve something else
Producing or selling goods Providing a service
1. Target 1. Chicago Cubs
2. Chicago Cubs 2. American Airlines
3. Best Buy 3. Post Office
4. Pizza Hut 4. Best Buy
5. Ikea 5. Pizza Hut
6. Heinz Ketchup 6. Apartment People
7. Ford 7. Ford
Factors of production:
1. Capital - machinery (what the company needs to provide service) / Human capital - someone with a good knowledge
about the goods or service being provided
2. Raw material / land - water, electricity
3. Labour - the people working to produce the service
4. Entrepreneur / Enterprise - the person who organises and operates a business / the actual business/company
Specialisation:
1. Specialisation / division of labour - is when the production process is split up into different tasks and each specialised
worker or machine performs one of these tasks (an assembly line)
2. This increases the companies value because they now can use robots and don't have to pay people specialised workers
are good at one task and that increases efficiency and output
3. Less time is wasted switching jobs by the individual
4. Machinery also helps all jobs and can be operated 24/7, which means more products will be manufactured
5. Some disadvantages are boredom because the workers are doing the same job over and over and this could lower their
efficiency
6. There is no flexibility because workers can only do one job and cannot do others well if needed
7. If one worker is absent and no-one can replace him, the production process stops
Primary, Secondary, and Tertiary Sectors:
Primary:
1. Involves extracting or harvesting natural resources from the land or sea. It often provides raw materials for secondary
sectors business and activity. Eg: farming, fishing, forests, mining coal, and oil. Customers can buy vegetables for their
fish
,Secondary:
1. Secondary firms that process and manufacture goods from natural resources
2. Secondary takes the natural resources by primal sector activity and turns these raw materials into finished goods. These
activities sectors include: refining, manufacturing, and construction
3. Examples of secondary sector business activities include food canning, furniture making, car manufacturing, and house
building
4. All about adding value to a natural resource
Tertiary sectors:
1. They fall under the category of: sales, repair services, banking, and insurance. These are all a service so therefore
tertiary sectors are a service industry
2. The tertiary sectors include workers in: the tourism and hospitality industry, such as doctors, and business consultants
3. Some tertiary industries have close ties with the primary and secondary industries
4. Raw materials (primary), manufacturing (secondary), and services (tertiary)
5. They sell the good to the end consumer
6. Because starting in the tertiary sector relies more on skill and interest rather than the start up capital. This is
because it doesn't depend too much on the physical products of the company, whereas it is more about
selling it to consumers
Quaternary Sector: research and development
MEDC (more economically developed countries) have greater proportion of business in the tertiary sector -
- Because labour is expensive : because labour want higher paying jobs
- White collar jobs offer entrepreneurship opportunities
Capital Intensive: when companies rely more on machines to make their products
Interdependence:
1. Interdependence is the connection between subjects where one subject needs to be fulfilled by the other subject
resources and these transfers of resources work both ways. This means that subjects need each other to fulfil their needs
2. How the sectors depend on each other: although an economy can be divided into primary, secondary, and tertiary
sectors, the different sectors of business activity are often dependent upon each other.
3. This is known as a chain of production / interdependence. For example oil, oil is extracted from underground and is a
business activity from a primary sector. Once it has been extracted oil needs to be refined with other products like
petrol or gas. This is a process carried out by a business in the secondary sector. Finally in the tertiary sector, it's needed
to bring petrol to the nearest petrol station, for sale to the final customer
Tariffs: when companies want to protect a certain sector they set tariffs on imported goods which makes it more expensive
Public Sector:
1. A part of the economy that is controlled by the government
2. Examples include: The Police, Public Library, Post Office etc.
3. Advantages:
a. greater number of people benefit: education, health care, parks
b. The government employs: teachers , consultants, doctors etc.
Private Sector:
1. A part of the national economy that is not controlled by the government
2. Examples include: Apple, Starbucks, Nike, etc.
Characteristics of successful entrepreneurs:
1. Innovative - they are good at thinking up new ideas for goods and services or new ways of presenting existing goods
and services
2. Self-motivated and determined - they have the drive to keep going, even when things get difficult
3. Self-confident - they have a strong belief in their own ability and ideas
4. Multi-skilled - they have the ability to see an idea through from development to profitable sales. This requires a good
understanding of the functions of finance , operations,human resources, and marketing
, 5. Strong leadership qualities - they have good communication skills, the ability to motivate others and are good
decision makers
6. Initiative - they not only have good ideas, but they are also able to develop a good plan for achieving the business’s
objectives
7. Results driven - they are focused on achieving results and make sure the products are sold for profit
8. Risk-taker - they are prepared to take risks, knowing that failure is a possibility. They see failure as a positive
experience to be learnt from
9. Good at networking - they are prepared to learn from others
Business Plans / The Government investing and Interest Rates:
1. Entrepreneurs make business plans so they have a structured plan of their goals and targets
2. The plans also show investors and banks that the business profits from
3. Includes location, costs, machines, employees etc.
4. New business’s sometimes have a multiplier effect
5. Governments will lower interest rates to stimulate borrowing
6. Savings are less worthwhile so spending increases
7. Indaviduals or companies keeping money in the bank earns them interest
Government grants: when the government gives the company money for a positive effect (eg. training employees) and the
company doesn't have to pay the bank back
Interest rate: a business takes money from the bank (a loan) but then the bank charges interest (there's a 5% interest rate, for
example). So every year that the loan isn't paid back 5% is added onto the original price and so on.
My own business:
● The business - our business is a puppy spa where we have highly trained professionals working with the dogs at all
time to make sure they get expert care
● The business opportunity - our company provides full care for services such as grooming and pedicures, and we also
provide goods like treats, toys, puppy shampoo and a puppy day care where you can drop your dog off. This is a huge
part of the business because market research has proven that people don't want their dogs to be alone during the day
and would rather have them in good care at a professional facility
● The market - research has shown that there are approximately 69 million dogs in the US and 43 million houses caring
for dogs who are all possible clients. In just Chicago alone our facility has 7 locations.
● The objectives of the business - our goal is to provide dogs with better care throughout the day and lower dog
depression rates because due to scientific research a large amount dogs who are kept home alone suffer from separation
anxiety with their owners
● Financial forecasts - during times such as summer, the sales in the company go up because many people go away for
the holidays and ask to drop their dogs off
Evaluate the decision of the Government to offer assistance to the Pawnee Videodome
1. No, because the company is already failing, and if the government gives them money there is nothing to say that the company
won't go out of business again also not everyone in the town are fans of what the business has to offer, and even when speaking to
the man who owns the business about how he had to improve it, he clearly wasn't aware of how much his business was failing so
that shows he doesn't have a clear business plan and wouldn't even know how to put the money to good use.
2. Yes, another reason i do think that the government should invest in the business, is because the councilwoman stated that this
was almost like a ‘landmark’ in the town and a very good place for families to go
Measuring a Business Size:
The Company Workers Employed Capital Employed (£ Sales (£ million)
million)
Hambro 20,000 50 100
Triumph 5,000 150 200
, Ducati 3,000 60 150
BMW 15,000 80 150
Profit = revenue - cost
Revenue = sales (output) x selling price
To increase profit, a company increases revenue, and lower the costs
Market share = Value of the companies sales ÷ total market shares
- Number of sales for a particular product compared to that product sold everywhere
Economies of Scale:
Factory cost = $30,000 Max Capacity = 30,000 units
Salaries = $20,000 Materials = $1.00 p/u
Costs = $10,000
FIXED COST = $60,000
Quantity Total Costs Average Cost p/u
1 60,001 60,001 p/u
1000 61,000 61 p/u
10,000 70,000 7 p/u
30,000 90,000 3 p/u
1. EOS arise when unit costs fall as output increases
2. Average cost per unit: Total production costs in period ($) / total output in period (units)
3. When unit costs are falling as output increases it is economies of scale
4. When unit costs start to rise as output rises above it is diseconomies of scale
5. Minimum efficient scale = the level of output at which average unit costs are at their
minimum
6. Internal EOS: arise from the increased output of the businesses itself
EXAMPLES:
a. Buying economies: buying in greater quantities usually results in a lower price
(bulk-buying)
b. Technical: use of specialist equipment or processes to boost productivity
c. Marketing: spreading a fixed marketing spend over a larger range of products, markets and customers
d. Network: adding extra customers or users to a network that is already established (eg. mobile phones)
e. Financial: larger firms benefit from access to more and cheaper finance
7. External EOS: occurs within an industry → all competitors benefit
8. External EOS is often associated with particular geographic areas (eg. creative & media in London)
EXAMPLES:
a. Having many specialist suppliers close by
b. Access to research and development facilities
c. Pool of skilled labour to choose from
Diseconomies of scale:
- Factors which cause the average production cost per unit of business to increase above the efficient level
1. Examples of DOS:
a. Poor communication
b. More difficult to control larger, more complex businesses
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