Purpose and Nature of Businesses

• purposes of businesses:

  -to produce a good

  -to produce a service

  -distribute products

  -benefit society

  -fill a gap in the market

  -fill a business opportunity
• goods


  items that are produced from raw materials for sale to businesses or consumers
• services

  actions that are carried out to fulfil a need or demand in return for payment
• wants

  things that people would like to have; not limited to the things they need to survive
• needs


  the human wants that are essential to survival; clothing, food, shelter, warmth or water
• four factors of production:

  -land

  -labour

  -capital

  -enterprise
• capital


  machinery/equipment needed by the business to make products/provide a service
• enterprise


  the ability to identify business ideas and opportunities to bring them to fruition and to take risks where appropriate
• opportunity cost


  the cost of making one choice concerning the use of limited resources at the expense of an alternative choice
• primary sector


  -businesses that produce or extract raw materials

  -first stage of production
• secondary sector


  -makes or manufactures goods using raw materials

  -usually in factories

  -second stage of production
• tertiary sector


  -provides services in areas such as health, & education

  -third stage of production
• 4 business functions

  marketing, operations, human resources and finance
• entrepreneur characteristics

  -hardworking

  -organised

  -innovative

  -willing to take a risk
• entrepreneur objectives

  -be their own boss

  -have independence and freedom to make own decisions

  -working hour flexibility

  -follow an interest/hobby

  -increase income (improve quality of life)

  -fill a gap in the market

  -escape a job they are unhappy/dissatisfied with

  -fulfil an ethical/social goal
• two types of objectives:

  financial + non-financial
• business environment changes:

  -technological (e-commerce)

  -economic (inflation)

  -legal change (new legislations)

  -environmental expectations (packaging)