Business Unit 1

Unit 1 - Business Notes

1.1 - What is a business?

Business: decision making organization involved in the process of using inputs to produce goods and/or provide services

Input: resources a business uses in the production process

Output: process generates outputs (products)

Product: both goods and services

Goods: physical products, tangible

Services: intangible, healthcare, education

Businesses can provide goods and services to other organizations such as freight transport, insurance, etc

Nature or purpose of business activity is to generate added value → occurs when there is a positive different between the selling price of a product and the cost of producing the good or service

Entrepreneur: plans, organizes and manages business and its operations, takes on financial risks

Entrepreneurship: trait of business leaders who are distinctive in their temperament, attitude, and outlook to drive the business and achieve goals

Successful entrepreneurs are creative, innovative, and passionate, constantly look for business opportunities and respond to changes in the marketplace

Needs and Wants: needs are the basic necessities that people need to survive, wants are desires

Customer vs consumer: customers are people or organizations who buy the product, and consumers are the ones who use the product

Types of Products:

Consumer goods - products sold to the general public, further categorized as consumer durables (last long time or used repeatedly) and non durables (need to be consumed shortly or cannot be reused)

Capital goods (aka producer goods) - physical products bought by businesses to produce other goods

Services - intangible products provided by businesses, service is not tangible but result is such as healthcare, legal advice, dining

Functional Areas for a Business:

Human resources management

Manages personnel

Human resource planning

Organizational structure

Management and leadership

Motivation and demotivation

industrial/employee relations

Finance and accounts

Manage money

Ensure compliance with legalities

Inform those interested in financial positions (shareholders and investors)

Marketing

Identify and satisfy needs and wants of customers

Ensuring products sell

Market research, promotion, pricing, branding, distribution

Operations management

Process of converting raw materials and components into finished goods

Business sectors:

Primary sector:

Extraction, harvesting, conversion of natural resources

Agriculture, fishing, mining

Account for large percentage of output and employment in low income countries

Secondary sector:

Manufacturing or construction

Clothes, publishing, breweries

Output sold to customers

Medium income countries have dominant secondary sector

Value is added to natural resources

Tertiary sector:

Providing services

Retail, healthcare, banking

Physical goods can be transformed in the process of providing service

High income countries tertiary sector is most substantial in terms of employment and output

Quaternary sector:

Sub category of tertiary sector

intellectual and knowledge based

Communication tech, research and development, scientific research

Mainly in high income countries

Sector where certain businesses invest for further growth

ALL SECTORS LINKED THROUGH CHAIN OF PRODUCTION:

All sectors interdependent

Primary production → manufacturing → services → consumers

Challenges for starting a business:

Lack of finance

Unestablished customer base

Cash flow problems

Marketing problems

People management problems

Production problems

Legalities

High production costs

Poor location

External influences

Opportunities for starting a business:

Growth

Earnings

Transference and inheritance

Challenge

Autonomy

Security

Hobbies