Unit 1 - Business in the Real World

• A business is an organisation that takes raw materials, and through the use of machinery and workers, converts them into goods and services to satisfy the needs and wants of consumers
• The raw materials, workers and machinery are organised into a business (or enterprise) by an entrepreneur.
• Land, labour, capital and enterprise - These 4 items are known as the factors of production
• Land - All natural resources (raw materials) used by a business
• Labour - All human mental and physical effort. A worker receives a wage as payment
• Capital - All goods and services made by humans to help them make other goods and services. This includes the factory and machinery
• Enterprise - the organisation of the other factors of production so that the business can make goods and services - receives profit as a reward for taking risks
• To produce anything a business (or enterprise) has to use factors of production. Nescafe Gold Blend, for example, is made from coffee beans, which are an example of land. Nestle's workers (labour) turn the beans into granules using a grinding machine (capital).
• Goods are:

  • Actual objects
  • Tangible (can be touched)
  • Produced and consumed
• Services are:

  • Provided by other people or businesses
  • Intangible (cannot be touched)
  • Activities
• A need is something that humans absolutely require to live (e.g. food, clothes, medicine, education)
• A want is something that humans don't necessarily need, but we desire to have it (e.g. fast foods, phones, holidays)
• A customer is whoever buys the product
• A consumer is whoever uses the product
• Reasons to start a business

  • To make money
  • To be your own boss
  • To fill gaps in the market
  • To help others - providing a service
  • Skills and interests
  • To fulfil a business opportunity
  • To meet the needs and wants of society
• Skills of an entrepreneur: Opportunity - spotter
• Skills of an entrepreneur: Risk taker
• Skills of an entrepreneur: Decision maker
• Skills of an entrepreneur: Creative thinker
• Skills of an entrepreneur: Self motivated
• Skills of an entrepreneur: Strong communicator
• GDP - Gross Domestic Product
• GDP - How much everyone uses in a time period
• Opportunity cost - Whatever that is being sacrificed from a decision made to aid the business, e.g.

  You have saved up money which can either be spent on your first car or a holiday, you make the decision to go on a holiday, the opportunity cost is the car
• Stages of production: Primary, Secondary and Tertiary
• Primary sector: Natural resources (raw materials) are extracted
• Secondary sector: Raw materials are converted into finished products using capital and labour. This process is known as manufacturing (and also includes construction)
• Tertiary sector: Finished products are sold to consumers. Services (such as accountancy) are provided to the other sectors
• Reasons as to why there has been a fall in employment in the secondary sector:

  • Imports have increased because other countries such as Taiwan and China are able to produce manufactured goods more cheaply than the UK
  • The development of new technology means that fewer people are now needed to make manufactured goods
• Reasons as to why there is a rise in employment in the tertiary sector:

  • An increase in population of the UK has led to an increase in demand for services such as banking
  • People in the UK now have more money to spend on luxury services such as eating out and going to the cinema
  • People in the UK now have more time and income for leisure activities
• The 4 business functional areas: Marketing, Finance, Human Resources and Operations
• Marketing involves research, advertising and branding
• Finance involves dealing with financial costs, paying bills, workers and saving money
• Operations involves making sure the work is done, the labour is put in and efficiently
• Human Resources involves training, motivation, the recruitment process and general admin for the business such as sickness forms
• All businesses operate un an environment that is constantly changing - a dynamic environment
• Ways in which a business environment changes:

  • Environmentally
  • Legally (legislatively)
  • Technologically
  • Economically
• Technological changes

  • E- commerce
  • Robotics
  • New and better machinery and equipment
  • Automation
• Legal (legislative) changes

  • Health and safety
  • Equality
  • National Minimum Wage
  • Competition
• Environmental changes

  • Climate change
  • Natural disasters
  • Global warming
  • Water shortages
  • Deforestation