Business — Business in the real world (paper 1 + paper 2)
What is a business? • A business sells products/provides a service to customers who are willing to
pay for them.
Reasons for starting a business • To produce goods that customers will want to pay for
• To supply services
• To distribute products
• To ful l a business opportunity
• To provide a good or service to bene t others
Difference between goods and services • Goods are physical/tangible items sold to customers eg. books
• Services are intangible products eg. Cutting someone’s hair
Difference between needs and wants • Needs are items/things that people can’t live without eg. water and food
• Basic human requirement
• Wants are items/things that people can survive without/would like to have eg.
holidays and jewellery
• Luxury/the desire for a particular product/thing
Factors of production • Land
- Earth’s natural resources
- Non-Renewable resources eg. natural gas, oil and coal
- Renewable resources eg. wind power, wood from trees
- Materials extracted from mining eg. gold
- The physical land and the site on which the business is located
• Labour
- Work done by the people who contribute to the production process
- The skills and numbers of staff employed by a business
• Capital (man-made resources used in production)
- Equipment eg. machinery needed by a business to make the products/provide
a service
- Factories/buildings
• Enterprise
- Refers to the entrepreneurs who take risks and organises the other factors of
production (and sets up the business)
- The skills of people involved in the business to identify business opportunities
De ne opportunity cost • Opportunity cost is the value of the next best alternative that's been given up
(because opportunity costs often relate to the future it is dif cult to quantify)
• occurs when a business is faced with a decision and must decide on one over
another
3 sectors of primary, secondary and • Primary
tertiary - Produces raw materials (natural resources which are used to make goods)
- Can be extracted from the ground eg. Mining industry provides coal and
Give examples of types of business that metals
operate in each sector - Can be grown eg. farming industry grows crops for food and raise livestock
animals
- Can be collected eg. shing industry collects sh from sea
• Secondary
- Manufactures goods and turn raw materials into nished goods
- Eg. chocolate making industry turns cocoa and milk into chocolate, building
and construction industries
• Tertiary
- Provides services
- Eg. hairdressers, restaurants, banks, hotels, taxis
fi fi fi fi fi fi fi
, Business — Business in the real world (paper 1 + paper 2)
What is an enterprise and what is meant • Enterprise is the willingness and ability to take risks, show initiative and
by an entrepreneur? organise resources to create a business opportunity
Outline the characteristics of an • Entrepreneur is someone who takes a calculated risk through starting a
entrepreneur business
• Hard working
- Prepared to work long hours, especially in the early stages of the business
• Innovative
- Can come up with new ideas/products and think of solutions to problems that
come up
• Organised
- Good organisational skills to keep on top of all the day-to-day tasks of running
the business as well as planning for the future
- Able to meet deadlines
- Knows how to manage their time so that the business runs ef ciently and
effectively
• Willingness to take a risk
- May need to give up current job and invest capital into the business that they
could lose if the business fails
- Prepared to take a calculated risk in order to maximise their rewards
Reasons why someone might decide to • To be their own boss
become an entrepreneur - Want to make their own decisions and have a sense of independence
(objectives of an entrepreneur)
• Flexible working hours
- More freedom
• To pursue an interest
- Can give them a lot of job satisfaction which can be very motivating for them
as they will have a genuine passion for the business, therefore will be highly
motivated to make the business succeed
• To earn more money
- Could give them a better quality of life
• Identi ed a gap in the market
- Leads to an opportunity to ful l a want/need that is not currently being met so
this makes it more likely that the business will be successful
• Dissatisfaction with current job
- Want to do something different which could make the feel happier/more
motivated to go to work
Dynamic nature of business • The business environment (external factors) is dynamic (ever-changing)
• Changes in technology
- Rapid improvement eg. growth of e-commerce
• Changes in economic situation
- Interest rates, exchange rates, consumer spending, level of employment
- An economic change could be rise in interest rates this will decrease
consumer spending . An economic change could be in ation this may increase
the cost of supplies
• Changes in legislation
- Eg. minimum wage increases so higher labour costs, therefore less pro t for
the business (impacts the business and its decisions)
• Changes in environmental expectations
- Eg. consumers conscious about environment more (impacts the business and
its decisions)
fi fi fl fi fi
What is a business? • A business sells products/provides a service to customers who are willing to
pay for them.
Reasons for starting a business • To produce goods that customers will want to pay for
• To supply services
• To distribute products
• To ful l a business opportunity
• To provide a good or service to bene t others
Difference between goods and services • Goods are physical/tangible items sold to customers eg. books
• Services are intangible products eg. Cutting someone’s hair
Difference between needs and wants • Needs are items/things that people can’t live without eg. water and food
• Basic human requirement
• Wants are items/things that people can survive without/would like to have eg.
holidays and jewellery
• Luxury/the desire for a particular product/thing
Factors of production • Land
- Earth’s natural resources
- Non-Renewable resources eg. natural gas, oil and coal
- Renewable resources eg. wind power, wood from trees
- Materials extracted from mining eg. gold
- The physical land and the site on which the business is located
• Labour
- Work done by the people who contribute to the production process
- The skills and numbers of staff employed by a business
• Capital (man-made resources used in production)
- Equipment eg. machinery needed by a business to make the products/provide
a service
- Factories/buildings
• Enterprise
- Refers to the entrepreneurs who take risks and organises the other factors of
production (and sets up the business)
- The skills of people involved in the business to identify business opportunities
De ne opportunity cost • Opportunity cost is the value of the next best alternative that's been given up
(because opportunity costs often relate to the future it is dif cult to quantify)
• occurs when a business is faced with a decision and must decide on one over
another
3 sectors of primary, secondary and • Primary
tertiary - Produces raw materials (natural resources which are used to make goods)
- Can be extracted from the ground eg. Mining industry provides coal and
Give examples of types of business that metals
operate in each sector - Can be grown eg. farming industry grows crops for food and raise livestock
animals
- Can be collected eg. shing industry collects sh from sea
• Secondary
- Manufactures goods and turn raw materials into nished goods
- Eg. chocolate making industry turns cocoa and milk into chocolate, building
and construction industries
• Tertiary
- Provides services
- Eg. hairdressers, restaurants, banks, hotels, taxis
fi fi fi fi fi fi fi
, Business — Business in the real world (paper 1 + paper 2)
What is an enterprise and what is meant • Enterprise is the willingness and ability to take risks, show initiative and
by an entrepreneur? organise resources to create a business opportunity
Outline the characteristics of an • Entrepreneur is someone who takes a calculated risk through starting a
entrepreneur business
• Hard working
- Prepared to work long hours, especially in the early stages of the business
• Innovative
- Can come up with new ideas/products and think of solutions to problems that
come up
• Organised
- Good organisational skills to keep on top of all the day-to-day tasks of running
the business as well as planning for the future
- Able to meet deadlines
- Knows how to manage their time so that the business runs ef ciently and
effectively
• Willingness to take a risk
- May need to give up current job and invest capital into the business that they
could lose if the business fails
- Prepared to take a calculated risk in order to maximise their rewards
Reasons why someone might decide to • To be their own boss
become an entrepreneur - Want to make their own decisions and have a sense of independence
(objectives of an entrepreneur)
• Flexible working hours
- More freedom
• To pursue an interest
- Can give them a lot of job satisfaction which can be very motivating for them
as they will have a genuine passion for the business, therefore will be highly
motivated to make the business succeed
• To earn more money
- Could give them a better quality of life
• Identi ed a gap in the market
- Leads to an opportunity to ful l a want/need that is not currently being met so
this makes it more likely that the business will be successful
• Dissatisfaction with current job
- Want to do something different which could make the feel happier/more
motivated to go to work
Dynamic nature of business • The business environment (external factors) is dynamic (ever-changing)
• Changes in technology
- Rapid improvement eg. growth of e-commerce
• Changes in economic situation
- Interest rates, exchange rates, consumer spending, level of employment
- An economic change could be rise in interest rates this will decrease
consumer spending . An economic change could be in ation this may increase
the cost of supplies
• Changes in legislation
- Eg. minimum wage increases so higher labour costs, therefore less pro t for
the business (impacts the business and its decisions)
• Changes in environmental expectations
- Eg. consumers conscious about environment more (impacts the business and
its decisions)
fi fi fl fi fi
