Business studies

• Enterprise


  The quality and idea of starting a new business venture. Understanding the nature of business activity and the environment in which businesses operate.
• Purpose of business activity
• Business activity can be described in terms of the production of goods and/or services to meet the needs of customers and to make a profit.
• Features to help you succeed
• Features


  • Expert tips
  • Definitions and key terms
  • Questions and answers
  • Now test yourself
  • Revision activities
• Enterprise


  The qualities and skills needed to start up and create a new business venture
• Purpose of business activity

  1. The transformation of inputs into outputs

  2. The use of resources to supply goods and services to meet the needs and wants of consumers and society
• Factors of production


  Land

  Labour

  Capital

  Enterprise
• Added value


  The value added at each stage of production as inputs are transformed into outputs
• Opportunity cost


  The real cost of making a decision about using resources - the next best alternative given up
• Businesses need to be aware of the opportunity cost of any action before they make final decisions
• Business environment


  • It includes the actions of other businesses, the labour market, government policies, consumer tastes, the legal framework, political factors, social factors, and changing technology
• What a business needs to succeed

  • Enterprise, Organisation, Financial monitoring, Human resource management, Marketing, Appropriate objectives and strategy, Coordination of functional areas
• As many as 60% of businesses fail in the first 2 years
• Reasons why many businesses fail early on


  • Lack of well-researched objectives and business plan

  Too little or too much cash

  Too much borrowing

  Cash-flow difficulties

  Unexpected growth too soon

  Unplanned-for competition and lack of market knowledge

  Poor marketing

  Poor initial location decision or credit arrangements

  Lack of experience and underestimation of time and money pressure

  Not enough passion, commitment or risk assessment
• Entrepreneur


  A person willing to take a risk and start a new business by bringing together all the resources necessary for success
• Qualities an entrepreneur is likely to need for success

  • Determination, drive and energy

  Passion, initiative and self-confidence

  Good leadership

  Good network-forming skills

  Low fear of failure

  Good assessor of risk and moderate risk-taker

  Clear goal and vision setting

  Good organisation

  Ability to determine and focus on market needs and wants
• New businesses are usually small, often supplying 55% of the jobs in a country and creating 25% of the wealth
• Enterprise in the form of new businesses generates new ideas, new products, new ways of working, the seeds for future growth, competition to ensure efficient markets, and employment opportunities and training
• Enterprises


  New businesses that generate new ideas, new products, new ways of working, seeds for future growth, competition to ensure efficient markets, and employment opportunities and training
• Characteristics of a successful entrepreneur

  • To be identified
• Changes that could occur in the business environment


  • To be identified
• Business enterprise measures risks and rewards. Private enterprise focuses on financial reward. Social enterprise focuses on improving society
• Social enterprise


  A business that trades for a social or environmental purpose and uses its profit for this, rather than distributing it to the owners
• Examples of social enterprises


  • To be identified
• Triple bottom line


  Targets that take account of a business's effect on society, including economic/financial performance, social impact, and environmental sustainability
• Differences between a profit-making business and a social enterprise


  • To be identified
• Primary sector business


  A business that deals with extracting natural resources, e.g. farming, forestry, fishing, oil, gas, quarrying or mining
• Secondary sector business


  A business that manufactures products or processes raw materials, e.g. to produce cars, furniture, buildings or processed food
• Tertiary sector business


  A business that provides a service, e.g. banking, insurance, education or travel
• Examples of businesses in the primary and tertiary sectors

  • To be identified
• Examples of businesses in the public and private sectors

  • To be identified
• Ways in which a public sector business might differ from a private sector business

  • To be identified
• Limited liability


  The financial liability of the owners of a business is limited to the amount they have invested
• Limited liability is important when a business has to raise large sums of money through a bank loan, as it means the loan is not dependent on individual persons
• Sole trader


  A business owned and run by one person responsible for decisions and taking all the profit
• Sole trader


  • Cheap, quick and easy to set up; the owner controls the business and has confidentiality; flexible
• Disadvantages of being a sole trader

  • Unlimited liability - might lose house to pay business debts; difficult to raise finance from loans; demands that the owner be skilled at all aspects of business operation; difficult for the owner to be absent from the business - no sick leave
• Partnership


  A business owned and run jointly by a number of partners who share the profit
• Advantages of a partnership


  • Easy and cheap to set up; more capital-raising ability with more than one person and extra partners; possibility of 'sleeping partners' to raise finance; shared responsibility, workload and stress; wider range of skills