Everything - business

• Needs


  Essential e.g. shelter or food
• Wants


  Desires which are non-essential, even if consumers consider them to be essential e.g. Nike trainers
• Scarcity


  Problem where choices have to be made by producers, consumers, workers and governments about the best (most efficient) use of resources
• Opportunity cost


  The loss of the next best alternative when making a decision
• Factors of production


  Land, labour, capital and enterprise
• Classification of Businesses

  • Classification Using the Economic Sector
  • Classification Using the Public & Private Sector
• Classification Using the Economic Sector


  • Primary, Secondary and Tertiary Sectors
  • The Three Main Business Sectors
  • Businesses can be classified according to the type of business sector in which they operate
  • Classification into these sectors is a simplified way of categorising industries
  • It helps to provide a means of making comparisons between firms in the same sector
  • It does not capture the full complexity and interconnectedness of the business world
  • Many businesses operate across multiple sectors or may not fit neatly into a single category
• Roles in the Primary, Secondary and Tertiary Sector

  • Farming in the primary sector
  • Manufacturing in the secondary sector
  • Hairdressing in the service sector
• When a consumer chooses to purchase a new phone

  They may be unable to purchase new jeans. The jeans represent the opportunity cost.
• Primary sector


  Concerned with the extraction of raw materials from land, sea or air such as farming, mining or fishing
• Secondary sector


  Concerned with the processing of raw materials such as oil refinement, and the manufacture of goods such as vehicles
• Tertiary sector


  Concerned with the provision of a wide range services for consumers and other businesses such as leisure, banking or hospitality
• The chain of production


  The series of steps taken to turn raw materials into a finished product that can be marketed and sold
• Firms can often add value to their products throughout the chain of production
• When a producer decides to allocate all resources to producing electric vehicles

  They may be unable to produce petrol vehicles. The petrol vehicles represent the opportunity cost.
• When a government decides to provide free school meals to all primary students

  They may be unable to fund some rural libraries which may have to close. The libraries represent the opportunity cost.
• Specialisation


  When people and workers focus on one particular role or task and thereby gain significant skill in doing it
• Division of labour


  The separation of a work process into a number of tasks that are completed by a separate person or group of persons
• Specialisation


  • Results in higher output per worker which increases productivity
  • More common due to specialised technology, machinery and increasing global competition
  • Occurs on individual, business, regional and global levels
• Purpose of business activity

  The activities that businesses engage in to produce goods or services that meet customer needs while adding value
• Businesses are usually started by an entrepreneur
• Changes in Sector Importance

  • As economies grow and develop, many of the firms within that economy will change their sector of operation (sectoral change)
  • Generally speaking, their are successively higher levels of profits to be made in each subsequent sector
  • The reason for this is that each sector adds more value than the previous sector
  • Higher added value equates to higher profits
• The process of adding value

  1. Taking raw materials and using them in such a way that the end product created is worth more than the cost of the raw materials used to create it

  2. The added value is the difference between the price that is charged to the customer and the cost of inputs required to create the product or service
• Methods of adding value

  • Branding
  • Offering more convenience to customers
  • Improving product quality or design
  • Building unique selling points

  
• Entrepreneur


  A person who is willing and able to create a new business idea or invention and takes risks in pursuing success
• Adding value is an important concept for businesses. The greater the added value the more successful the business is likely to be and the higher their profits.
• Successful entrepreneurs


  • Can identify and pursue opportunities
  • Create value for customers
  • Build thriving businesses
• What entrepreneurs do


  • Organise resources
  • Make business decisions
  • Take risks
• Organising resources


  An entrepreneur must be able to gather and coordinate the resources necessary to start and operate a business
• Making business decisions


  Entrepreneurs must be able to make decisions that will determine the success or failure of their business
• Less Developed Economies


  • A less developed economy will primarily be focused on the primary sector – with most people employed in agriculture and the production of food
  • There has been a global trend away from employment in primary sector industries over the last two decades
  • Only in the least developed nations is the proportion of the workforce employed in the primary sector consistently high
  • This is partly as a result of lower participation rates in education and a lack of infrastructure to support manufacturing or service provision
• Taking risks


  Entrepreneurship involves taking financial, personal, or professional risks
• Employment in Agriculture in a Range of Economies since 1991


  • Malawi still retains the highest proportion of employment in the primary sector
  • China has seen a significant decrease in primary sector activity
  • Germany has had very low primary sector and will have likely been in manufacturing and services well before 1991
• Characteristics & skills required by entrepreneurs

  • Risk taker
  • Decision maker
  • Organised
  • Creative
  • Great communicator
  • Independent
• Emerging Economies


  • Improved technology enables less labour to be needed in the primary sector and more workers are involved in manufacturing
  • The proportion of workers employed in manufacturing has risen over the last few decades
  • Many businesses have relocated production facilities to take advantage of the lower average wage rates in these economies
  • Emerging economies have experienced growth in the tertiary and quaternary sectors in recent years, with many businesses now focused on the provision of consumer services
• Risk taker


  Entrepreneurs take financial, personal, or professional risks
• Decision maker


  Entrepreneurs must be able to make decisions that will determine the success or failure of their business
• Secondary Sector Employment Since 1991

  • China has the highest proportion of employment in the secondary sector
  • Ghana and India have seen significant increases in secondary sector activity
  • Brazil and Turkey's secondary sectors have remained relatively stable over the period 1991 to 2019
• Organised


  An entrepreneur must be able to gather and coordinate the resources necessary to start and operate a business
• Creative


  Developing new solutions to solve existing or emerging problems is a key entrepreneurial role that helps a business stand out from rivals and achieve success