1.1.1 nature of business activity

purpose of business activity

a business exists to take limited resources and to convert them into a physical product that you can touch or services. It does this to provide the things that people need in order to survive.

factors of production for business activity (+ definition for each factor)

• land (all natural resources used in production)

• labour (human effort used in the production)

• capital (human made resources used in production)

• enterprise (risk taking and decision making skill of the entrepreneur who combines land, capital and labour)

adding value formula

selling price - total cost per unit

ways to add value

• USP

• quality

• customer service

• convenience

• packaging

the economic problem

there are unlimited wants, however there is limited resources available to fill the unlimited wants.

choice

selecting between alternatives due to scarcity of the natural resources available

opportunity cost

the next best alternative option that is lost when a business makes its decision

dynamic business environment

in a business environment, the environment always changes.

Why do business always changes

• economic conditions such as inflation

• legislation laws such as sustainability requirement

• change in customers needs/taste

• competition

why do business succeed

• effective market research

• strong cash flow management

• clear USP

• skilled leadership

• able to adapt to the changes in the dynamic business environment

why do businesses fail

• poor cash flow management

• weak/poor market research

• doesn’t adapt to the dynamic business environment

• poor leadership

local business

operates in a small geographical area

national business

operates across one country

international business

exporting or importing across national boarders without owning foreign facilities

multinational corporation

where its product/service facilities are in more than one country