Business activity

• Business Enterprise


  The formation of a new business or development of a new good or service to be introduced to the market
• Reasons why people want to set up their own business

  • Personal ambition / satisfaction
  • Interest
  • To keep a family business running
  • Reward for own efforts
  • Can exploit an opportunity/identify a gap in the market to increase wealth
  • Provide a service to local community/social enterprise
  • Use skills
  • Be own boss / to be in control
  • No work available
  • Use qualifications
  • Encouragement by external/government agencies to set up own business
  • To use redundancy pay to take advantage of the opportunity to set up a business
  • Easy to set up
• Entrepreneur


  A person who sets up a business by taking on the financial risks in the hope of making a profit
• Entrepreneur


  • Initiative - Taking action
  • Innovation - Idea for a new good or service
  • Identifying opportunities - Spotting a gap in the market
  • Organising resources - Planning and using a range of resources e.g. raising finance, employing staff, buying materials
• Functions of an Entrepreneur

  • They set up a business / they are the business owners / they run (manage) the business
  • They have the idea / show the initiative / innovation
  • They take the risks / face the uncertainties / suffer the consequences of failure
  • Qualities / characteristics of an entrepreneur - determined / organised
  • They invest / put money into the business
  • They earn the profits / earn an income
• Motives of Entrepreneurs


  • Financial - Generate a profit, Provide employment for self, Financial security for self and family
  • Non-financial - Self satisfaction/challenge, Be own boss, Fill a gap in the market, Create employment for others
  • Social/community - Social enterprises are those whose prime objective is to do good in society rather than to make a profit, Surplus revenue is used to support a specific cause
• Rewards of being an Entrepreneur

  • Be their own boss
  • Flexible working hours
  • Pursue an interest
  • Good customer feedback
  • Earn more money (profit)
  • Dissatisfaction with current job
  • Greater work life balance
  • Self- esteem from building something new
  • Self- satisfaction
  • Provide employment for self and others
• Risks of being an Entrepreneur

  • Financial loss of income and money invested
  • Low sales
  • Unexpected costs e.g. rise in rent
  • Unexpected events e.g. new competitor
  • Potentially long hours and stress
  • Loss of security
  • Pressure on friends and family
  • Damage to reputation if fail
  • May lose home
• Sectors of Industry


  • Primary
  • Secondary
  • Tertiary
• Primary sector


  Where the raw materials are produced, e.g. farming, mining, forestry
• Secondary sector


  Where the raw materials are manufactured into goods, e.g. factory
• Tertiary sector


  Businesses in this sector provide a service, e.g. retailer, hotel, school
• Chain of Production


  Links the primary, secondary and tertiary sectors together in the production process
• Factors of Production


  • Land
  • Labour
  • Capital
  • Enterprise
• Land


  The natural resources that are needed to produce goods
• Labour


  Physical and mental element that is needed to produce goods and services
• Capital


  The money (working capital) and fixed capital that is needed to produce goods and services
• Enterprise


  People who have the ideas to start a business and organise the other 3 factors of production
• Consumers


  The final users of goods and services. They are at the end of the distribution channel
• Services


  Things you cannot touch; they are non-physical intangible items
• Public Sector


  Organisations owned and controlled by the government
• Types of Services


  • Personal Services
  • Commercial Services
• Public Sector


  • NHS
  • Police
  • Education
  • Armed Forces
• Aims & Objectives of Public Sector

  • Provide a service
  • Improve accessibility to others
  • Avoid wasteful duplication of resources
• Private Sector


  Businesses run by private individuals
• Private Sector


  • Sole traders
  • Partnerships
  • Ltd.'s
  • Plc.'s
• Unlimited Liability


  The owners of a business are responsible for all of the debts of a business. Personal belongings may need to be given up to pay the debts of the business.
• Personal Services


  Services provided for individuals, including services for personal grooming, house maintenance, car repair etc.
• Sole Trader


  Businesses owned by one person who has unlimited liability. Other people can be employed but there is only one owner.
• Advantages of Sole Trader

  • Profit - can keep all profit / no need to share
  • Making decisions - without consulting others / will be speedy
  • Own boss - free to choose / any example
  • Independence - can work at own pace
  • Easy to set up - few formalities / therefore cheaper to set up
  • Have a job - may not be able to find one elsewhere
• Commercial Services


  Services that provide mainly to businesses such as transport and warehousing, but they may also be available to individuals such as insurance and banking
• Disadvantages of Sole Trader

  • Unlimited liability - responsible for debts of the business
  • More responsibility - relies heavily on their own ability to make decisions / may work long hours and have limited holidays, as there is no one to cover them
  • Limited sources of resources
• Partnerships


  A business that is owned by between 2 and 20 people. An unincorporated business with unlimited liability.
• Needs


  Items that you have to have in order to survive, e.g. food, water, warmth, clothing, shelter
• Wants


  Items that you would like to have but are not necessary to your survival, e.g. TV, mobile phone, holidays, cars
• Advantages of Partnerships


  • Raise more capital than sole traders - individuals may not be able to raise sufficient capital alone
  • Extra skills / expertise in business - may be able to specialise in aspects of business to provide a better service
  • More people to make decisions - more considered approach to running the business / more ideas which may lead to success
  • Shared responsibility and more flexibility - reduce pressure on individuals such as duties / working hours / able to take time off / debts / losses can be shared
  • Easy to set up - may involve no legal requirements / Deed of Partnership possible
• Markets


  Where buyers and sellers meet in order to exchange goods and services, often for money
• Disadvantages of Partnerships


  • Partners may disagree - time used up in discussion / decisions take longer
  • Profits will be shared - compared to a sole trade where the owner can keep all profits to themselves
  • Some partners may not work as hard as others - may demoralise/ lead to arguments
  • Continuity - also applies to sole trader / but effect on surviving partners if one leaves
  • The owners will still have unlimited liability - the partners will be held responsible for the debts of the business
• Deed of Partnership


  A legal document which is an agreement between partners that sets out the rules of the partnership, such as how profits will be divided and how the partnership will be valued if someone wants to leave.
• Retailers


  Sell goods to consumers. Small retailers buy their stock from wholesalers but large-scale retailers buy directly from manufacturers