The purpose and nature of a business

Reasons for starting a business :

• To make profit

• To fulflll a dream

• To innovate or do something that hasn’t been done before

• For ethical reasons like helping people

A business is a company that produces goods or services for customers to buy.

A good is a tangible product meaning its something that you can touch like a book

A service is something intangible like water.

A want is a luxury that you would like to have but can live without

A need is something that you must have in order to survive like water

The factors of production :

• Capital - The money and equipment required to produce the goods and services

• Land - The space where the business is located

• Labour - The work done by the people who contribute to the production process

• Enterprise - the innovative idea made by the entrepreneur

Opportunity cost is the next best alternative given up.

The sectors of production :

• The primary sector - The production of raw materials

• Secondary sector - Manufacturing goods

• Tertiary sector - Providing a service

Enterprise

Enterprise describes the actions of someone who takes a risk by setting up and running a business.

An entrepreneur is someone who takes financial risks in hope of reward.

Characteristics of a Entrepreneur :

• Hardworking - They are willing to work long hours especially in the early stages of the business

• Determined - They are resilient and will handle any problem that may arise

• Innovative - The ability to come up with new ideas and spot a key business opportunity

Objectives of a Entrepeneur :

• Being unhappy with current job like not liking the terms and conditions of employment

• To work flexible hours and not be tied to hours given by employer

• To be their own and therefore make all the decisions

Business ownership

A sole traders

A sole trader is a business that is set up and run by only one person.

Advantages

• Full decision over the decision making including keeping all of the profit

• very quick and easy to set up

• minimal paper work

Disadvantages

• Unlimited liability

• Increased stress, as full responsibility falls on one person

• difficult to raise start up capital

Partnerships

When there is more than one owner

Advantages

• Greater skillset

• Liability is shared

• Workload is split

Disadvantages

• Unlimited liability

• Potential for conflict

• profit is shared

Aims and objectives

An Aim is a broad target that a business will set out to achieve

Objectives set out how a business plans to achieve its aims

Survival - Main focus when a business is starting up. This is because they have very little customers meaning they are currently only focusing on making as much sales as possible to keep competitive.

Profit maximisation - As a business grows they will get more customers meaning they will make more sales. This means that over time they may only be focusing on making as much profit as possible.

Growth - Growth can be achieved through domestically or internationally. This is down to expand the business improving the brand image therefore getting a good reputation.

Objectives provide a clear direction for businesses. As a result they give a sense of purpose for employees which can increase motivation.

Setting objectives allows businesses to track progress comparing their recent performances with their targets. If a business is off track then a business can make a decision to try and rectify the situation increasing the success of the business.

Stakeholders

A stakeholder is a person or organisation that is affected by or affects the activities of the business

Objectives of stakeholders :

• Owner - good profit and for share price to increase

• Customer - value for money and for products to meet their expectations

• Supplier - prompt payment

• Employees - good working conditions and a reasonable pay

Factors influencing the location of a business :

Proximity to market : Some businesses may need to locate near to customers for example businesses that provide services, allowing the target market to easily access the business which may increase demand r=therefore increase revenue

Proximity to raw materials : A business can depend on supplies on a raw material to produce its goods. This means that costs will be lower if the supplier is near the business. For example where the raw material is grown.

Proximity to labour - A business having the right skilled workers takes a major role in how it performs. If they are unable to recruit the right workers then it means that they wont work effiently therefore limit there ability to grow.