business Activity (12)

Definition of Business
- A business is an organization that provides goods and services.
- Businesses exist to meet the needs (basic goods) and wants (non-essential items) of people.
Examples of Needs and Wants
- Needs: Food, drink, shelter.
- Wants: DVD players, cars, holidays.
Goods vs. Services
- Goods: Physical objects purchased (e.g., flour, laptop).
- Services: Non-physical items purchased (e.g., education, healthcare).
Business Activity Features
- Produces goods and services (e.g., Unilever produces margarine).
- Goods and services are consumed by customers (2 billion people consume Unilever products daily).
- Resources are used in production (significant spending for Unilever).
- Businesses strive to make a profit.

Limited Resources
- Resources are limited to fulfill unlimited wants of people, causing scarcity.
- Opportunity Cost: The next best alternative given up when choosing between options.
Factors of Production
- Land: Natural resources provided by nature.
- Labour: Workforce available for production.
- Capital: Financial resources, machinery, and equipment needed.
- Enterprise: Entrepreneurial skill and risk-taking ability that combines factors for production.
Scarcity
- Insufficient products to meet population demands.
Specialization and Division of Labour
- Specialization: Focus on what individuals or businesses do best.
- Division of labour: Production split into tasks, where each worker performs a specific task.

Concept of Added Value
- Definition: Difference between the cost of raw materials and the final sale price.
- Note: Added value is not the same as profit.
Ways to Add Value
- Brand name, packaging, advertising (e.g., celebrity endorsements), machinery, increasing selling price, reducing cost.

Definition of Stakeholders
- A stakeholder is anyone affected by a business's activities or has a vested interest.
Types of Stakeholders
- Internal Stakeholders: Individuals within the organization (e.g., directors, employees).
- External Stakeholders: Individuals outside the organization (e.g., customers, suppliers, creditors, banks, community).

Shareholder Objectives
- Attractive dividends, increase in share price, capital gains.
Employee Objectives
- Job security, fair pay, good working conditions, and a friendly culture.
Customer Objectives
- Good quality products at affordable prices, excellent customer care.

Measures of Size
- Number of employees (Firm X vs. Firm Y), sales turnover, capital employed.
Growth Benefits
- Higher sales and profits, falling average costs (economies of scale), increased status for owners, greater bargaining power with suppliers (e.g., Wal-Mart).

Types of Growth
- Internal Growth (organic): Opens new branches; financed through loans, retained profits.
- External Growth: Mergers and takeovers; requires controlling interest (>50% shares).
Mergers vs. Takeovers
- Mergers combine two companies into one.
- Takeovers involve one company controlling another.
Considerations for Growth
- Synergy can lead to increased efficiency but may also face cultural clashes.

Integration Types
- Horizontal Integration: Same industry, stage of production (e.g., economies of scale).
- Vertical Integration (Forward): Control over pricing and promotion; secure outlets for products.
- Vertical Integration (Backward): Control over quality, price, and delivery times.
- Conglomerate Integration: Reduces risk in different industries but may lose focus on core business.
Reasons for Staying Small
- Industry type, market size, owner's objectives.

Public Corporations
- Owned and managed by government, often nationalized businesses.
- Government prevents wasteful competition, can nationalize failing industries.
Public Sector Objectives
- Financial: Meet government profit targets.
- Service: Public service provision.
- Social: Protect or create employment.
Business Objectives
- Survival, profit, returns to shareholders, growth, social service, and social enterprise objectives.