What is business?

• What is a business?

  A business is an organisation that exists to provide goods and services on a commercial basis to customers
• Why do businesses exist

  Businesses exist to provide goods and services
• Benefits of a business to society

  • Creates employment and develops human capital
  • Drives innovation through R&D and new products
  • Pay taxes on profits earned and collect taxes for government
  • Create wealth by providing returns on investment
• Start-ups


  A new business enterprise, formed by one or more entrepreneurs
• Entrepreneur

  An individual who creates a new business, bearing most of the risks and enjoying most of the rewards
• The role of the entrepreneur

  • Spots business opportunities
  • Takes (calculated) risks in order to gain possible future returns
  • Acts a catalyst (speeds up) for the creation and growth of new business enterprises.
• The transformation process


  The transformation process describes what happens inside the business. This is where value is added to the inputs to create outputs
• Input examples

  • Finance
  • People
  • Capital equipment
  • Materials and components
  • Land and natural resources
• Output examples

  • Goods
  • Services
  • Waste products
• Key inputs into the transformation process

  1. Land- location
  2. Labour- workers
  3. Capital- machinery, equipment
  4. Enterprise- individual in control of the above
• Added value


  Added value is the difference between the price of a finished product/service and the cost of the inputs involved in making it
• Types of business


  Primary- extraction of natural resources

  Secondary- production of finished goods and components

  Tertiary- providing services to consumers and businesses

  Quaternary- providing information and ICT
• B2B


  Business to business

  Wholesaling

  Business banking

  Business travel

  Commercial property

  • based on relationships with business buyers
  • more sophisticated buyers
  • often small and focused market
  • more complex and longer buying process
• B2C- Business to consumer

  Retailing

  Family tourism

  Personal banking

  House building

  • less sophisticated buyers
  • product more important than relationships
  • usually larger market
  • Short buying process (e.g. impulse purchase)