1. Unit 1
1.1 Chapter 1: Enterprise
Entrepreneur: an individual who has the idea for a new business, starts
it up and carries most of the risks but benefits from the rewards.
Customer: an individual consumer or organisation that purchases goods
or services from a business.
What do businesses do?
- Businesses identify the needs of customers
- They purchase necessary resources to allow production to take place
- They produce goods and services which satisfy customers’ needs,
usually with the aim of making a profit.
Consumer: an individual who purchases goods and services for personal
use.
Consumer goods: the physical and tangible goods sold to consumers
that are not intended for resale. These include durable consumer
goods, such as cars and washing machines, and non-durable consumer
goods, such as food, drinks and sweets, that can be used only once.
Consumer services: the non-tangible products sold to consumers that
are not intended for resale. These include hotel accommodation,
insurance services and train journeys.
Factors of production: the resources needed by business to produce
goods and services
The factors:
- Land: not only land itself but also the renewable and non-renewable
resources of nature like coal, timber and crude oil.
- Labour: manual and skilled labour make up the workforce of the
business.
- Capital: the finance needed to start up a business and capital goods,
such as computers, machinery, vehicles.
- Enterprise: the action of showing initiative to take the risk to set up a
business.
Capital goods: the physical goods used by industry to aid in the
production of other goods and services, such as machines, …
Adding value: selling goods and services for a higher price than the cost
of bought-in materials.
,Added value: The difference between the selling price of the products
sold by a business and the cost of the materials that it bought. (no
profit because there are other costs that need to be paid off, such as
salaries and rent).
Branding: the process of differentiating a product by developing a
symbol, name, image or trademark for it.
The economic problem: there are not enough resources to satisfy all our
needs and wants. Even the rich people can’t have all the luxury goods
they want.
Opportunity cost: the next most desired option that is given up.
Changes in the business environment include:
- new competitors entering the market
- legal changes ( new safety regulations)
- economic changes that leaves customers with less money to spend
- technological changes that make the products or processes of the
new business outdated.
That’s why decision-making by the entrepreneur is so important
Why do some businesses succeed?
- Good understanding of customer needs -> leads to sales targets
being achieved
- Efficient management of operations -> keeps costs under control
- Flexible decision-making to adapt to new situations -> allows
investment in new business opportunities
- Appropriate and sufficient sources of finance -> prevents cash
shortages and allows for expansion.
Why do some businesses fail?
- Poor record keeping
- Lack of cash
- Poor management skills
Multinational business: a business organisation that has its
headquarters in one country, but with operating branches, factories and
assembly plants in other countries.
Intrapreneur: a business employee who takes direct responsibility for
turning an idea into a profitable new product or business venture.
The benefits of intrapreneurship to existing business include:
- Injecting creativity and innovation into the business
- Developing new ways of doing business
, - Driving innovation and change within the business
- Creating a competitive advantage
- Encouraging original thinkers and innovators to stay in the business
The role of the entrepreneur when creating and starting up a new
business is to:
- Have an idea for a new business
- Create a business plan
- Invest some of their own savings and capital
- Accept the responsibility of managing the business
- Accept the possible risks of failure
Qualities of successful entrepreneurs and intrapreneurs:
- Innovation, attract customers in a innovative way
- Commitment and self-motivation
- Multi-skilled, make the product, promote it and sell it
- Leadership skills
- Self-confidence and an ability to bounce back
- Risk-taking
Role of enterprise in a country’s economic development:
- Creation of employment
- Economic growth
- Business survival and growth
- Innovation and technological change
- Exports
- Personal development
- Increased social cohesion ( less unemployment)
Business plan: a written document that describes a business, it’s objective,
it’s strategies, the market it is in and its financial forecast.
1.2 Chapter 2: Business structure
Private limited company: a business that is owned by shareholders who
are often members of the same family; this company cannot sell shares to
the general public.
Advantages Disadvantages
Shareholders have limited liability There are legal formalities involved
in establishing the business
The company has a separate legal Capital cannot be raised by the
personality sale of shares to the general public
There is continuity in the event of It is quite difficult for shareholders
, the death of a shareholder to sell shares
The original owner is still often able End-of-year accounts must be sent
to retain control to the government office
responsible for companies, and are
available for public inspection( so
there is less secrecy over financial
affairs than for a sole trader or
partnership)
The company is able to raise
capital from the sale of shares to
family, friends and employees.
The company has greater status
than an unincorporated business
Initial public offering(IPO): an offer to the public to buy shares in a public
limited company.
Public limited company (PLC): a company whose shares are traded on a
stock exchange and can be bought and sold by the public.
Advantages Disadvantages
Shareholders have limited liability Formation entails legal formalities
The company has a separate legal There can be high costs of paying
identity for advice for business consultants
when creating a PLC
There is continuity Share prices are subject to
fluctuation, sometimes for reasons
beyond a business’s control
It is easy for shareholders to buy There are legal requirements
and sell shares, encouraging concerning disclosure of
investment information to shareholders and
the public
Substantial capital sources can be There is a risk of takeover due to
accessed due to the ability to issue the availability of the shares on the
a prospectus to the public and to stock exchange
offer shares for sale (called a
flotation)
Directors may be influenced by the
short-term objectives of the mayor
investors
Economic sectors:
- Primary sector business activity: firms engaged in farming, fishing,
oil extraction and all other industries that extract natural resources
so that they can be used and processed.
1.1 Chapter 1: Enterprise
Entrepreneur: an individual who has the idea for a new business, starts
it up and carries most of the risks but benefits from the rewards.
Customer: an individual consumer or organisation that purchases goods
or services from a business.
What do businesses do?
- Businesses identify the needs of customers
- They purchase necessary resources to allow production to take place
- They produce goods and services which satisfy customers’ needs,
usually with the aim of making a profit.
Consumer: an individual who purchases goods and services for personal
use.
Consumer goods: the physical and tangible goods sold to consumers
that are not intended for resale. These include durable consumer
goods, such as cars and washing machines, and non-durable consumer
goods, such as food, drinks and sweets, that can be used only once.
Consumer services: the non-tangible products sold to consumers that
are not intended for resale. These include hotel accommodation,
insurance services and train journeys.
Factors of production: the resources needed by business to produce
goods and services
The factors:
- Land: not only land itself but also the renewable and non-renewable
resources of nature like coal, timber and crude oil.
- Labour: manual and skilled labour make up the workforce of the
business.
- Capital: the finance needed to start up a business and capital goods,
such as computers, machinery, vehicles.
- Enterprise: the action of showing initiative to take the risk to set up a
business.
Capital goods: the physical goods used by industry to aid in the
production of other goods and services, such as machines, …
Adding value: selling goods and services for a higher price than the cost
of bought-in materials.
,Added value: The difference between the selling price of the products
sold by a business and the cost of the materials that it bought. (no
profit because there are other costs that need to be paid off, such as
salaries and rent).
Branding: the process of differentiating a product by developing a
symbol, name, image or trademark for it.
The economic problem: there are not enough resources to satisfy all our
needs and wants. Even the rich people can’t have all the luxury goods
they want.
Opportunity cost: the next most desired option that is given up.
Changes in the business environment include:
- new competitors entering the market
- legal changes ( new safety regulations)
- economic changes that leaves customers with less money to spend
- technological changes that make the products or processes of the
new business outdated.
That’s why decision-making by the entrepreneur is so important
Why do some businesses succeed?
- Good understanding of customer needs -> leads to sales targets
being achieved
- Efficient management of operations -> keeps costs under control
- Flexible decision-making to adapt to new situations -> allows
investment in new business opportunities
- Appropriate and sufficient sources of finance -> prevents cash
shortages and allows for expansion.
Why do some businesses fail?
- Poor record keeping
- Lack of cash
- Poor management skills
Multinational business: a business organisation that has its
headquarters in one country, but with operating branches, factories and
assembly plants in other countries.
Intrapreneur: a business employee who takes direct responsibility for
turning an idea into a profitable new product or business venture.
The benefits of intrapreneurship to existing business include:
- Injecting creativity and innovation into the business
- Developing new ways of doing business
, - Driving innovation and change within the business
- Creating a competitive advantage
- Encouraging original thinkers and innovators to stay in the business
The role of the entrepreneur when creating and starting up a new
business is to:
- Have an idea for a new business
- Create a business plan
- Invest some of their own savings and capital
- Accept the responsibility of managing the business
- Accept the possible risks of failure
Qualities of successful entrepreneurs and intrapreneurs:
- Innovation, attract customers in a innovative way
- Commitment and self-motivation
- Multi-skilled, make the product, promote it and sell it
- Leadership skills
- Self-confidence and an ability to bounce back
- Risk-taking
Role of enterprise in a country’s economic development:
- Creation of employment
- Economic growth
- Business survival and growth
- Innovation and technological change
- Exports
- Personal development
- Increased social cohesion ( less unemployment)
Business plan: a written document that describes a business, it’s objective,
it’s strategies, the market it is in and its financial forecast.
1.2 Chapter 2: Business structure
Private limited company: a business that is owned by shareholders who
are often members of the same family; this company cannot sell shares to
the general public.
Advantages Disadvantages
Shareholders have limited liability There are legal formalities involved
in establishing the business
The company has a separate legal Capital cannot be raised by the
personality sale of shares to the general public
There is continuity in the event of It is quite difficult for shareholders
, the death of a shareholder to sell shares
The original owner is still often able End-of-year accounts must be sent
to retain control to the government office
responsible for companies, and are
available for public inspection( so
there is less secrecy over financial
affairs than for a sole trader or
partnership)
The company is able to raise
capital from the sale of shares to
family, friends and employees.
The company has greater status
than an unincorporated business
Initial public offering(IPO): an offer to the public to buy shares in a public
limited company.
Public limited company (PLC): a company whose shares are traded on a
stock exchange and can be bought and sold by the public.
Advantages Disadvantages
Shareholders have limited liability Formation entails legal formalities
The company has a separate legal There can be high costs of paying
identity for advice for business consultants
when creating a PLC
There is continuity Share prices are subject to
fluctuation, sometimes for reasons
beyond a business’s control
It is easy for shareholders to buy There are legal requirements
and sell shares, encouraging concerning disclosure of
investment information to shareholders and
the public
Substantial capital sources can be There is a risk of takeover due to
accessed due to the ability to issue the availability of the shares on the
a prospectus to the public and to stock exchange
offer shares for sale (called a
flotation)
Directors may be influenced by the
short-term objectives of the mayor
investors
Economic sectors:
- Primary sector business activity: firms engaged in farming, fishing,
oil extraction and all other industries that extract natural resources
so that they can be used and processed.
