Purpose of business activity The purpose of business activity is to identify and satisfy the needs and wants of the

people with the overall aim of earning profit

Concept of adding value To add extra features to a product The customer is willing to pay more after the value has been added

Nature of economic activity The nature of economic activity is that there are limited resources to satisfy unlimited wants Due to the limited resources everyone has to make choices (individuals, businesses, governments)

Business environment is dynamic Everything is changing Consumers expectations Production techniques Competitions behavior Employees demands

What a business needs to succeed Factors of production Land, labour, capital and enterprise Finance Planning Contacts Customers Suppliers

Why business fail early on Lack of planning Lack of funds Lack of expertise

Qualities needed by entrepreneur Ability to take risk Good planner Organise the other 3 factors of production Motivate the workforce

Role of business enterprises in the development of a country Business enterprises provide employment They pay taxes They increase the GDP of the country They satisfy the needs and wants of the people They bring foreign currency if the products are sold outside the country

Range and aims of social enterprises They operate for the well being of the society Making profit is not the main aim Main aim is to solve social problems faced by people Profit is kept to provide more services They normally provide education and health

Triple bottom line Triple bottom line is used to measure the performance of a business: Economically Socially

Environmentally

3 sectors in Business activity Primary sector Secondary sector Tertiary sector

Primary sector Primary sector involves changing natural resources into primary products The primary sector of the economy extracts or harvests products from the earth Examples: Fishing, Mining Farming, Forestry

Secondary sector Secondary sector converts the primary goods into manufactured goods The secondary sector of the economy manufactures finished goods. Examples: Construction Textile production Processing

Tertiary sector Tertiary sector is the service industry. This sector makes the lives of people much easier by providing services Examples: Banking

Hair cutting Teaching

Private sector The sector controlled and run by private individuals and organizations

Public sector The controlled and run by the government

Types of business organisations Sole trader Partnership Limited companies Franchise Joint ventures

Sole trader A business owned and managed by one person One person makes the decisions Sole trader raises finance by his/her own savings, retained profits and loans If business loses money, the sole trader has to sell his/her personal assets to pay off creditors (unlimited liability)

Partnership The business is owned and managed by 2-20 people Partners make the decisions

Profit is shared among the partners Partners raise finance by putting their savings and capital into business If business loses money, the partners have to sell their personal assets to pay off creditors (unlimited liability)

Limited company A business owned and managed by a group of people Directors make the decisions Profit is shared among the shareholders Limited companies raise finance by issuing shares If business loses money the shareholders dont have to sell their personal assets to repay creditors

Franchise To use the name of a large business to conduct business activities Franchisee uses the name Franchisor grants the permission to franchisee to use the name for fees Eg. Mc Donalds has many restaurants all over the world which are running by the franchisee www.fetsystem.com [AS-LEVEL BUSINESS STUDIES SECTION 1.2 REVISION NOTES]

Problems of changing from one legal structure to another Sole trader to partnership Partnership to private limited company

Changing from Sole trader to Partnership

Sharing profits Interference in decision-making Bad decision of one partner affects all partners

Changing from Partnership to limited company Owners may lose control Legal work required Financial accounts have to be made public Decrease in privacy

Different methods of measuring the size of a business Number of employees working Market share Sales revenue Capital invested

Small business Advantages of being small business Complete control No legal requirements Good owner-customer relationship

Disadvantages of being small business Limited capital Unlimited liability

Strengths of family business Strong commitment Family members may work for lower salaries Family members are able to solve each others problems

Weaknesses of family business Business suffers if the family members fight Confused roles

Small businesses Small businesses provide goods and service which a large business may not provide Small businesses may cater to customers specific demands Small businesses provide employment

Why business might grow The business might grow To earn more profit To have a higher status

How business might grow The business might grow in two ways Internal growth Offer more products Locating in other places External growth By buying another business

 By joining with another business

Nature and importance of business objectives They give a direction to the business Success can be measured by setting objectives

Corporate responsibility The businesses have made corporate responsibility as an objective

Relationship between Mission statement Objectives Strategy Tactics

Mission statement, objectives, strategy and tactics Mission statement is a general or vague statement about the businesss plan Objective follow the mission statement but they are more clear and identifiable Strategies are made to achieve the objectives Tactics are actions taken to successfully implement strategy

Role of objectives in decision making Business managers make important decisions relating to the business keeping in view the main objectives of the business For example If the objective of a business is to increase sales then the business managers will decide to increase the advertising budget

How objectives may change over time In the initial years of operation a business might have the main objective to survive so it will sell its products at low prices As the time progresses and the business establishes itself. Its main objective would be profit and to achieve that the business will sell its products at higher prices

Translation of objectives into targets and budgets The process by which objectives are translated into targets and budgets is called MBO (Management by objectives)

Communication of objectives Communication of objectives will have a very good affect on the performance of the work force The workers will feel motivated They will be able to give their input too

How ethics may influence business objectives A business may have an objective of reducing costs. To achieve this objective it might not set a pollution control plant It is not ethical to spread pollution The community may ask the business to set up the plant to reduce pollution in the area