understanding business activity

What is the basic purpose of a business?

A business aims to satisfy consumer needs and wants by providing goods or services, typically with the objective of making a profit.

Differentiate between "needs" and "wants."

1. Needs: Basic requirements for survival (e.g., food, water, shelter, clothing).
2. Wants: Desires beyond basic needs (e.g., luxury items, entertainment).

What is meant by "scarcity" in economics?

Scarcity refers to the fundamental economic problem of having seemingly unlimited human wants and needs in a world of limited resources. It forces choices to be made.

Identify and explain the four main factors of production.

1. Land: Natural resources used in production (e.g., raw materials, land for factories).
2. Labor: Human effort, both physical and mental, used to produce goods and services.
3. Capital: Man-made resources used to produce other goods and services (e.g., machinery, buildings, tools).
4. Enterprise: The skill and initiative to combine the other three factors of production to produce goods and services, taking risks in the process.

Describe the primary sector of industry with an example.

The primary sector involves the extraction and collection of natural resources. Examples include farming, fishing, mining, and forestry.

Describe the secondary sector of industry with an example.

The secondary sector involves manufacturing and processing raw materials into finished or semi-finished goods. Examples include car manufacturing, food processing, and construction.

Describe the tertiary sector of industry with an example.

The tertiary sector provides services to consumers and other businesses. Examples include retail, banking, healthcare, education, and tourism.

What is "de-industrialisation"?

De-industrialisation is the decline in the importance of the secondary (manufacturing) sector in an economy, often accompanied by an increase in the tertiary (services) sector.

What is the role of an entrepreneur?

An entrepreneur is an individual who identifies business opportunities, organises the factors of production, takes financial risks, and makes business decisions to start and manage a business venture.

Explain what "enterprise" means in a business context.

Enterprise refers to the willingness of an individual or organisation to take risks, innovate, and use initiative to create and develop new business ideas, goods, or services, often leading to added value.

Define "added value" and state how can a business increase it.

1. Added value: The difference between the selling price of a product or service and the cost of buying in materials and components.
2. Ways to increase added value: Improve quality, enhance design, provide excellent customer service, effective marketing/branding, offer convenience (e.g., fast delivery, easy access).

List common business objectives for private sector businesses.

1. Survival: Especially for new businesses.
2. Profit Maximisation: Generating the highest possible profit.
3. Growth: Increasing the size of the business (e.g., sales, employees, market share).
4. Market Share: Increasing the proportion of total market sales a business has.
5. Customer Satisfaction: Meeting or exceeding customer expectations.
6. Social/Ethical Objectives: Operating in a way that benefits society or the environment (e.g., CSR).

Who are "internal stakeholders"?

Internal stakeholders are individuals or groups who are directly involved in the operation and management of the business.

• Examples: Owners, managers, employees.

Who are "external stakeholders"?

External stakeholders are individuals or groups outside the business who are affected by its activities.

• Examples: Customers, suppliers, government, local community, lenders, pressure groups.

Give an example of how different stakeholder groups might have conflicting objectives.

Managers might want to invest profits back into the business for long-term growth (benefiting employees through job security, and customers through better products), while shareholders might want to receive higher dividends in the short term, potentially reducing funds available for investment.