Section 1-Business in the real world
Why Business set up?
Business supplies goods and a service.
Good- Physical items that you are able to touch-NONINTANGIBLE E.g. Book, Furniture
Service- actions performed by other people to aid the customer, this is something you are not
able to touch. -INTANGIBLE E.g. Barbers, Plumber
Some businesses provide goods or services that are needs and wants:
Need-things you cannot leave without. E.g. Water, Food
Want- things you would like to have but can survive without E.g. Holidays, Jewellery, Coke
Businesses set up for various of reasons such as:
-To benefit the economy. They could organise volunteers to go help children in schools to
learn how to read.
-To distribute goods and services.
-They see a business opportunity they want to fulfil so they start a business.
-They think customers will benefit and will want to pay for.
Sectors of the economy
3 Sectors of economy:
Primary sector- Produces raw material such as natural resources used to make
goods or services. E.g. Mining Industry provides coal, oil and gas OR Farming
Industry
Secondary Industry- Manufactures the goods. They turn the raw material into
finished goods.
Tertiary Sector- Provides services.
Enterprise
Enterprise can either mean a business or organisation or personal qualities.
Entrepreneur is someone who takes risk of enterprise activity.
Entrepreneur Objectives
To be their own boss and have the independence and freedom to make their
own decisions.
To have more flexibility with their working hours
To follow an interest or hobby
Increase their income and improve their quality of life
To fill in a gap in the market
To escape from a job they are unhappy with
To fulfil an ethical or social goal
Entrepreneur Qualities
Hardworking
Organised
Innovative
Willingness to take a risk
Factors of Production
There are four factors of production that a business needs to be able to produce their
products or provide their service. These are land, labour, capital, and enterprise.
,Land - This includes the physical land where the business is located and the natural resources
that a business might need. This includes non-renewable resources such as gas and oil and
renewable resources such as wind power. These are often scarce resources.
Labour - This includes the staff needed by the business and the skills and qualifications they
have.
Capital - This is the machinery and equipment needed by the business to make the products or
provide the service.
Enterprise - This is the entrepreneur who takes a risk and creates the business using the other
three factors of production.
Opportunity cost
An opportunity cost is something that is given up to do something else. For example this could
be when a business must choose between two different office locations, they will face
opportunity costs for the location they do not choose. Another example is if a business has
£5,000 and must choose between using the money for a new advertising campaign or more
training for its staff, they must weigh up the opportunity costs of picking one option over the
other.
Dynamic nature of business
To understand what makes a business dynamic, it is necessary to understand the market in
which the business or enterprise operates. All business environments change constantly and
are impacted by several different national and international factors.
he business environment can experience the following changes:
Technological change – businesses need to keep up with rapid
changes in technology. This includes advertising methods,
production, e-commerce, and m-commerce.
Economic change – economic factors can have a big impact on the
success of a business. These include interest
rates, inflation, and Gross Domestic Product (GDP).
Legal change – businesses will be affected by new legislation.
Changes to laws such as minimum wage may increase the costs of
the business or affect the demand for the product as workers now
have more disposable income.
Environmental expectations – businesses must be aware of how
strongly their customers feel about environmental and other ethical
issues. This will affect how they produce, package, and transport their
products as well as the resources they use.
Types of Business Ownerships
Sole traders
, A sole trader is a business that is owned and run by one person. There is only one owner, but
they may have employees who work for them. Sole traders are usually start-ups or small
businesses. For example, photographers, electricians, hairdressers, graphic designers, social
media influencers, bloggers, small online clothing brand owners and beauty therapists may set
up as sole traders.
Some advantages of sole trading
it is quick and easy to set up as a sole trader.
the business owner(s) have a lot of control over the business and its money.
it gives individuals the opportunity to be their own boss and make all the business
decisions.
it has low set-up costs.
Some disadvantages of sole trading
it has the risk of unlimited liability.
it can involve long work hours and stressful conditions.
there is a high level of responsibility for the owner.
often the owner performs many different roles in the business.
Unlimited Liability - When the business owner or owners are personally responsible for all the
debt of the business. This means they use their personal belongings to pay their debts.
Partnerships
A partnership is a type of business that has between 2 and 20 owners.
They decide to set up and run a business between them.
Partnerships are often found in businesses that provide a professional
service, such as lawyers, doctors, and accountancy practices. In a
partnership, the owners agree a set of rules. These are outlined in a
document called a deed of partnership. As an example, this document
may specify how profits are allocated, what percentage of the business
each person owns, their roles and responsibilities, and the percentage of
any business debts that each person would have to pay. The owners in a
partnership pay income tax on their earnings.
Some advantages of a partnership
it is usually quick and easy to set up
there is shared decision-making by the owners
there is shared responsibility for debt by the owners
partners bring more skills and ideas
there is more capital available to invest
Why Business set up?
Business supplies goods and a service.
Good- Physical items that you are able to touch-NONINTANGIBLE E.g. Book, Furniture
Service- actions performed by other people to aid the customer, this is something you are not
able to touch. -INTANGIBLE E.g. Barbers, Plumber
Some businesses provide goods or services that are needs and wants:
Need-things you cannot leave without. E.g. Water, Food
Want- things you would like to have but can survive without E.g. Holidays, Jewellery, Coke
Businesses set up for various of reasons such as:
-To benefit the economy. They could organise volunteers to go help children in schools to
learn how to read.
-To distribute goods and services.
-They see a business opportunity they want to fulfil so they start a business.
-They think customers will benefit and will want to pay for.
Sectors of the economy
3 Sectors of economy:
Primary sector- Produces raw material such as natural resources used to make
goods or services. E.g. Mining Industry provides coal, oil and gas OR Farming
Industry
Secondary Industry- Manufactures the goods. They turn the raw material into
finished goods.
Tertiary Sector- Provides services.
Enterprise
Enterprise can either mean a business or organisation or personal qualities.
Entrepreneur is someone who takes risk of enterprise activity.
Entrepreneur Objectives
To be their own boss and have the independence and freedom to make their
own decisions.
To have more flexibility with their working hours
To follow an interest or hobby
Increase their income and improve their quality of life
To fill in a gap in the market
To escape from a job they are unhappy with
To fulfil an ethical or social goal
Entrepreneur Qualities
Hardworking
Organised
Innovative
Willingness to take a risk
Factors of Production
There are four factors of production that a business needs to be able to produce their
products or provide their service. These are land, labour, capital, and enterprise.
,Land - This includes the physical land where the business is located and the natural resources
that a business might need. This includes non-renewable resources such as gas and oil and
renewable resources such as wind power. These are often scarce resources.
Labour - This includes the staff needed by the business and the skills and qualifications they
have.
Capital - This is the machinery and equipment needed by the business to make the products or
provide the service.
Enterprise - This is the entrepreneur who takes a risk and creates the business using the other
three factors of production.
Opportunity cost
An opportunity cost is something that is given up to do something else. For example this could
be when a business must choose between two different office locations, they will face
opportunity costs for the location they do not choose. Another example is if a business has
£5,000 and must choose between using the money for a new advertising campaign or more
training for its staff, they must weigh up the opportunity costs of picking one option over the
other.
Dynamic nature of business
To understand what makes a business dynamic, it is necessary to understand the market in
which the business or enterprise operates. All business environments change constantly and
are impacted by several different national and international factors.
he business environment can experience the following changes:
Technological change – businesses need to keep up with rapid
changes in technology. This includes advertising methods,
production, e-commerce, and m-commerce.
Economic change – economic factors can have a big impact on the
success of a business. These include interest
rates, inflation, and Gross Domestic Product (GDP).
Legal change – businesses will be affected by new legislation.
Changes to laws such as minimum wage may increase the costs of
the business or affect the demand for the product as workers now
have more disposable income.
Environmental expectations – businesses must be aware of how
strongly their customers feel about environmental and other ethical
issues. This will affect how they produce, package, and transport their
products as well as the resources they use.
Types of Business Ownerships
Sole traders
, A sole trader is a business that is owned and run by one person. There is only one owner, but
they may have employees who work for them. Sole traders are usually start-ups or small
businesses. For example, photographers, electricians, hairdressers, graphic designers, social
media influencers, bloggers, small online clothing brand owners and beauty therapists may set
up as sole traders.
Some advantages of sole trading
it is quick and easy to set up as a sole trader.
the business owner(s) have a lot of control over the business and its money.
it gives individuals the opportunity to be their own boss and make all the business
decisions.
it has low set-up costs.
Some disadvantages of sole trading
it has the risk of unlimited liability.
it can involve long work hours and stressful conditions.
there is a high level of responsibility for the owner.
often the owner performs many different roles in the business.
Unlimited Liability - When the business owner or owners are personally responsible for all the
debt of the business. This means they use their personal belongings to pay their debts.
Partnerships
A partnership is a type of business that has between 2 and 20 owners.
They decide to set up and run a business between them.
Partnerships are often found in businesses that provide a professional
service, such as lawyers, doctors, and accountancy practices. In a
partnership, the owners agree a set of rules. These are outlined in a
document called a deed of partnership. As an example, this document
may specify how profits are allocated, what percentage of the business
each person owns, their roles and responsibilities, and the percentage of
any business debts that each person would have to pay. The owners in a
partnership pay income tax on their earnings.
Some advantages of a partnership
it is usually quick and easy to set up
there is shared decision-making by the owners
there is shared responsibility for debt by the owners
partners bring more skills and ideas
there is more capital available to invest
