REVISION UNIT 1 2 3

8/7/2019 REVISION UNIT 1 2 3

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Business Activity


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What is a business?What is a business?

A decisionA decision--making organization involved in themaking organization involved in the

process of using inputs to produce good and/orprocess of using inputs to produce good and/orprovide services.provide services.

Businesses exist to satisfy the needs and wantsBusinesses exist to satisfy the needs and wants

of people, organizations, and governments.of people, organizations, and governments.

Peter Drucker: the only purpose of a business isPeter Drucker: the only purpose of a business is

to create customers.to create customers.

Drucker is considered the father of modernDrucker is considered the father of modern

management and wrote nearly 40 business booksmanagement and wrote nearly 40 business books


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What do businesses do?What do businesses do?

Businesses process inputs to create goods orBusinesses process inputs to create goods or

servicesservices Goods are physical productsGoods are physical products

Consumer goodsConsumer goods purchased by general public; can bepurchased by general public; can be

durable or nondurable or non--durabledurable

Capital goodsCapital goods purchased by businessespurchased by businesses

Services are intangible productsServices are intangible products

Businesses contribute a value added thatBusinesses contribute a value added that

enhances the value of the inputs and producesenhances the value of the inputs and produces

profit for the businessprofit for the business


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How do businesses produce?How do businesses produce?

By using the factors of production:By using the factors of production:

LandLand Labor / labourLabor / labour

CapitalCapital

Enterprise / entrepreneurshipEnterprise / entrepreneurship


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How can businesses be classified?How can businesses be classified?

Businesses are classified by the stage ofBusinesses are classified by the stage of

production in which they are employedproduction in which they are employed Primary sectorPrimary sector involved with raw materialsinvolved with raw materials

Secondary sectorSecondary sector involved in manufacturing orinvolved in manufacturing or

construction using those raw materialsconstruction using those raw materials

Tertiary sectorTertiary sector provides servicesprovides services

Primary

production

Primary

productionManufacturing

ManufacturingTertiary

production

Tertiary

productionConsumers

ConsumersChain of production


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New Thinking:

Tertiary Sector

transport, energy, water (utilities)

Quarternary Sector

finance, trading

Quinary Sector

health, education, research, leisure and recreation(After Daniel Bell: 1976 The Coming of Post Industrial Society)


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Business Activity

Multiple Business Activity e.g. BP involved in:

Oil exploration and drilling (Primary)

Refining oil production of gas, petroleum, bitumen,lubricants, etc. (Manufacturing)

Distribution of petrol from refineries to petrol stations andsales of petrol to consumer (Tertiary)

Research and Development (Quarternary)


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Business Objectives

Businesses exist to provide goods or services

Whether or not they have to make a profit,businesses have to satisfy customers wants orneeds

There can be many different motivations forpeople to set up in business


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Why set up in business?

Fed up with working for someone else

Quality of life

Buzz of success

Feel in control

Financial reward

I could do better than that!


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What are Stakeholders?

Stakeholders are groups of people who have an

interest in a business organisation They can be seen as being either external to the

organisation, or internal

But some may be both!


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Types of Stakeholder

Owners (I)

Shareholders (I)

Managers (I)

Staff or employees (I)

Customers (E)

Suppliers (E)

Community (E)

Government (E)

I = Internal

E = External


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Internal and External Stakeholders

Internal stakeholders are those who are members of the

business organisation

Owners and shareholders

Managers

Staff and employees

External stakeholders are not partof the firm


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But..!

Some groups can be both internal and external

stakeholders Such as staff or shareholders

who are also local residents

Can you think of any others?


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Characteristics of Stakeholders

1. Owners and Shareholders

The number of owners and the roles they carry out differ according tothe size of the firm

In small businesses there may be only one owner (sole trader) orperhaps a small number of partners (partnership)

In large firms there are often thousandsof shareholders, who each own a small partof the business


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2. Managers:

organise

make decisions

plan

control

are accountable to the owner(s)



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3. Employees or Staff:

A business needs staff or employees

to carry out its activities

Employees agree to work a certain number

of hours in return for a wage or salary

Pay levels vary with skills, qualifications, age, location, types of work

and industry

and other factors


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4. Customers:

Customers buy the goods or services produced by firms

They may be individuals or other businesses

Firms must understand and meet the needs

of their customers, otherwise they will fail

to make a profit or, indeed, survive


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5. Suppliers:

Firms get the resources they need to produce goods and services

from suppliers

Businesses should have effective relationships with their suppliers in

order to get quality resources at reasonable prices

This is a two-way process, as suppliers depend on the firms they

supply



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6. Community:

Firms and the communities they exist inare also in a two-way relationship

The local community may often provide many of the firms staff andcustomers

The business often supplies goods

and services vital to the local area But at times the community can feel aggrieved by some aspects of

what a firm does



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7. Government:

Economic policies affect firms costs (through taxation and

interest rates)

Legislation regulates what business can do

in areas such as the environment

and occupational safety and health

Successful firms are good for governments

as they create wealth and employment



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Business Activity

Private Sector: Business activity owned financed andcontrolled by private individuals

Sole Traders

Partnerships

Private Limited Companies

Public Limited Companies (PLCs)

Co-operatives

Franchises Charities


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Objectives of Private Sector Business

Objectives

Survival

Share Price

Market PowerSales and Sales

Revenue

Efficiency

Quality andInnovation

Image andReputation

EnvironmentSatisficing

Social Issues

Profit


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Business Activity

Public Sector: Business Activity owned, financed and

controlled by the state through government or localauthorities

Government key departments set policy and monitor

implementation

Local Authorities County Councils,

District Councils, Parish Councils

Health Trusts

Public Corporations BBC


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Objectives of Public Sector Activity

Access

available to all regardless of location or income

Quality high quality services that do not cut corners

Affordability

services offered at prices that are cheaper than private sector or free atthe point of use

Equity

available to anyone whatever their background, status, income, class,race, religion, etc.


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Range of Business Offered by the Public Sector

RoadsAllotments Paths and Parks

Schools

StreetLighting

WasteDisposal

TradingStandards

Cemeteries

EnvironmentalHealth

Museums

and Arts

EconomicDevelopment andTourism

Planning

LicensingCare of the

ElderlySocial

Services

Documents

REVISION UNIT 1 2 3