Business Studies 1.1-1.5

• Needs are goods or services essential for living, such as water, basic food, and clothing
• Wants are goods and services that people desire but are not essential for living, like brand name clothing, expensive food, and luxury cars
• Scarcity is the economic problem of unlimited wants but not enough products due to insufficient factors of production
• The 4 factors of production are:

  • Land: Natural resources like trees, forests, and oil
  • Labour: Number of workers available for production
  • Capital: Money needed for business operations, including machinery and robots
  • Enterprise: Entrepreneurs with skills to create and manage a business
• Opportunity Cost is the benefit or value that must be given up to achieve something else
• Specialisation involves workers or machines focusing on specific parts of the production process to cut costs and create higher quality products
• Division of labour divides the production process into different tasks for specialized workers to work on, increasing efficiency and reducing wasted time
• Advantages of division of labour:

  • Increased efficiency as workers repeat the same task
  • Elimination of time wasted moving between tasks
• Disadvantages of division of labour:

  • Workers may become bored, leading to decreased efficiency
  • Production may halt if one worker fails to perform their task
• Added Value is the difference between the selling price of a product and the cost to produce it
• Added value can be increased by charging higher prices or reducing costs by using cheaper materials
• Economic Sectors:

  • Primary Sector: Extracts and uses natural resources like fishing and farming
  • Secondary Sector: Manufactures goods using raw materials from the primary sector
  • Tertiary Sector: Provides services to consumers and other industries like restaurants and travel agents
• De-industrialisation occurs when the manufacturing sector becomes less important in a country due to various factors like resource depletion and high factory costs
• Private Sector consists of businesses owned by private individuals with the goal of making a profit
• Advantages of the Private Sector:

  • High efficiency and lower costs
  • Encourages competition, leading to lower prices
• Disadvantages of the Private Sector:

  • Some services may close due to financial issues
  • Workers may lose jobs to improve efficiency
• Public Sector includes government or state-owned businesses with the goal of providing non-profit services to all citizens
• Advantages of the Public Sector:

  • Business is funded by the government
  • Encourages job creation
• Disadvantages of the Public Sector:

  • Low efficiency
  • Lack of competition between businesses
• Entrepreneur is a person who organises and operates a business
• Characteristics of successful entrepreneurs:

  • Hard working
  • Risk taker
  • Creative
  • Self-confident
  • Effective communicator
• A Business Plan is a document containing important information about a business, needed for bank loans and reducing the risk of failure
• Governments support new businesses by providing loans, low-cost land, grants for training, access to research facilities, and business advice
• Methods of measuring business size:

  • Number of employees
  • Value of output
  • Value of sales
  • Value of capital employed
• There is no perfect way to compare businesses as each business is unique
• Reasons why businesses grow:

  • Increased profit opportunities
  • Better status and prestige
  • Lower average costs
  • Increased market control
• Ways businesses can grow:

  • Internal Growth
  • External Growth through mergers, joint ventures, and conglomerate mergers
• Problems of business growth:

  • Difficulty in control
  • High expansion costs
  • Poor communication in large businesses
• Reasons why some businesses remain small:

  • Type of industry
  • Market size
  • Owner's objectives
• Reasons why some businesses fail:

  • Poor management
  • Failure to plan for change
  • Poor financial management
• Common reasons for business failure include:

  • Failure to plan for change in the constantly changing business environment
  • Poor financial management leading to a shortage of money for operations
  • Over expansion causing financial strain
  • Startup risk due to lack of experience and competition with larger businesses
• Types of business organisation:

  • Unincorporated Business: does not have a separate legal identity from its owner(s)
  • Incorporated Business: has a separate legal identity from its owner(s)
• Liability in business:

  • Unlimited Liability: owners are held liable for the business debts
  • Limited Liability: owners only lose what they invested if the business fails
• Main forms of business organisations:

  Unincorporated Businesses:

  • Sole Trader: owned and operated by one person
  • Partnership: owned by 2 owners
• Advantages of Sole Trader:

  • Cheap and easy to startup
  • Full control of the business
• Disadvantages of Sole Trader:

  • Unlimited Liability
  • Business ceases to exist if the owner dies
  • Limited funds for business expansion
• Advantages of Partnership:

  • More investment from 2 owners
  • Tasks can be shared between owners
• Disadvantages of Partnership:

  • Unlimited Liability
  • Business dissolution if one owner leaves
  • Potential for disagreements between owners
• Incorporated Businesses:

  • Private limited company (LTD): owned by shareholders
  • Public limited company (PLC): shares can be sold to the public
• Advantages of Private limited company (LTD):

  • Limited Liability to all shareholders
  • Capital can be invested by many shareholders