Business activity & Specialization

Understanding Business Activity

• Needs are essential goods or services required for survival.
• Wants are desired but non-essential goods or services.
• Unlimited wants combined with limited resources lead to scarcity, the fundamental economic problem.
• Scarcity means there are insufficient products to satisfy the population's wants.
• Resources, the factors of production, include land, labor, capital, and enterprise.
• Land encompasses any natural resource used in production.
• Labour refers to mental and physical human effort in production.
• Capital constitutes man-made goods used in production.
• Enterprise involves the risk-taking ability of an entrepreneur.
• Limited resources necessitate choices, leading to opportunity cost.
• Opportunity cost is the next best alternative forgone when making a choice.

Specialization

• Specialization occurs when individuals and businesses focus on specific tasks they excel at.
• Division of labour involves splitting production into distinct tasks, each performed by a different worker.
• Advantages of specialization are increased worker efficiency, reduced time wastage, and potential economies of scale.
• Further advantages that workers become more skilled and experienced, reducing errors.
• Disadvantages to specialization are worker boredom, potential efficiency decline, and worker absence disrupting production.
• A final disadvantage are the employees' interdependence leading to potential productivity falls.

Purpose of Business Activity

• Businesses combine limited resources to produce goods or services to fulfill people's wants.
• Businesses employ workers and pay wages, enabling them to purchase goods and services.

Added Value

• Added value is the difference between the selling price and the cost of raw materials and components.
• Added Value = Selling Price - Total Cost.
• Added value excludes labour and transport cost.
• Businesses can increase added value by increasing selling price while maintaining material costs.
• Alternative way to increase value by creating a brand image, improving packaging, and enhancing product appeal/quality.
• Another way to increase value by decreasing the total cost of materials while keeping the selling price the same.

Classification of Businesses

• Businesses are classified into primary, secondary, and tertiary sectors.
• The primary sector extracts natural resources like farming and fishing.
• The secondary sector manufactures goods like car manufacturers.
• The tertiary sector provides services, such as hairdressing and banking.
• The importance of each sector depends on the number of workers and the output value.
• Deindustrialization occurs when the secondary sector's influence declines.
• Deindustrialization is caused by the depletion of the primary resources in a home country.
• Other causes for deindustrialization are cheaper goods from developing countries, and increased spending on services.

Mixed Economy

• A mixed economy includes both private and public sectors.
• Private sector businesses are not owned by the government.
• Private sector businesses make their own decisions with the aim of making profits.
• Public sector businesses are owned by the government.
• Public sector businesses make decisions on how to produce.
• The public sector aims to provide customer service.
• Privatization involves selling a public sector business to the private sector
• Privatization occurs because the private sector is more efficient in making good quality goods.

Enterprise, Business Growth & Size

• An entrepreneur organizes, operates, and takes risks to improve a business.
• Entrepreneurs are hard working, risk takers, creative, effective communicators, optimistic, self-confident, innovative, and independent.
• Advantages of being an entrepreneur are the freedom to choose their tasks, and the ability to put own ideas into practice.
• Other advantages are the potential to become successful and translate personal interests/skills into a business.
• Final advantage is having no need to share the profits with anyone.
• Disadvantages of being an entrepreneur are spending their own money for the Business.
• Other disadvantages the the risk of entrepreneurs' businesses failing, lack of knowledge, lost income, and the high financial cost.
• Investors, the government, competitors, bank need to know the size of a business.

Business Plans

• A business plan contains business objectives, information on operations, finances, and the owners.
• Business plans are important to gain finance and reduce the risk of failing.
• A business plan includes name, type of organization, business aim and forecast profit.

Government Support for Start-Ups

• Governments encourage start-ups to reduce unemployment, increase competition, and increase outputs.
• Governments also support start-ups to grow and become bigger which would increase taxes for the government.
• Governments support through business ideas & help by setting up sessions that are held by experienced business people.
• Government may lend loans at low interest rates or grants.
• Governments provide grants for employees to be more efficient.
• Final form of government support would be allowing entrepreneurs to use research facilities in universities.

Business Size

• Business size is measured by the number of employees, output value, the value of sales, or capital invested.
• Number of measurement sizes have limitations as each give different answers.
• Some businesses employ few people, high output, low output with low-cost equipment
• The value of output or sales depends product differences (expensive and cheap)
• Businesses choose the method that they find is best for measuring the size.

Reasons for Business Growth

• Businesses want to grow because it means higher profits, more status, economies of scale, and a larger market share.

Ways of Business Growth

• Businesses can grow by internal expansion and external integration.
• Internal Growth takes place when a business expands existing operations
• External growth occurs when the business takes over, merges with another business, or becomes a Conglomerate Merger.
• Three types of External Growth are horizontal integration, vertical integration, and conglomerate merger.
• Horizontal integration occurs when firms takes over another firm in the same industry.
• Benefits of horizontal integration are economies of scale and higher market share.
• Problems with horizontal integration are diseconomies of scale and difficult to control, manage.
• Vertical Integration occurs when a firm expands in the same industry as a different stage of production.
• Benefits of Vertical integration supplier, retailer profits, and personal attention
• Another External way to gorw Is the Conglomerate Merger – firm merging with another firm in a different industry.

Size of Market

• Small businesses are at greater risk because they are established by youngsters, need to borrow, have little experience/information
• Final reason to why small businesses are at greater risk is Entrepreneurs being unrealistic about their idea.

Why Businesses Fail

• Businesses fail do to poor management, failure to plan for change, poor money management, and over expansion.
• Another reason for why business fail is competition with other businesses.

Sole Trader

• A sole trader is being a business owned by one person.
• Being a sole trader is the smallest type of business.
• Advantages of being a sole trader are being able to easily set up, not requires a lot of money, and they are their boss.
• Other advantages include close relationship with customers, not having to share profits, and they can have laser legal restrictions.
• Disadvantages of being a sole trader being hard to get capital, having unlimited liability, and business is likely to remain small.
• Another disadvantage is needing someone to discuss matters with, giving info about the business, and the business will end if the owner dies.

Partnerships

• Partnership is a business in which 2 to 20 people agree to own it
• A business is usually small but bigger tahn sole traders
• Usefull for people who wants to form a business but dont wants the legal complications and knows each other very well
• Advantages to partnerships are easy to set up, do not require a lot of money, capital is usually provided and is motivated.
• Other advantages to partnerships Responsibilities are shared, Capital is usually provided and losses are shared.
• Disadvantages to partnerships are Usually difficulty providing capital, and partners have unlimited liability.
• Agreements Should include information like how tasks and profits are shared out and how long partnership will last

Private Limited Company (LTD)

• An LTD is different from other because they can sell shares.
• An LTD is a is can sell shares and it is an incorporated business.
• Advantages to LTD shares can be sold to lots of people and kept control off.
• other advantages company can continue if shareholder dies.
• Disadvantages being Shares are difficult transfer and accounts Are more secret than other forms of business.
• Private Limited Companies are useful for family for partnerships expand by sellig shares

Public Limited Company (PLC)

• Advantages raise large capitol with oppitity sell share
• Disadvantages Difficult and complicated

Joint Venture

• is when two or more businesses start a project together Sharing capital Risks and profits

Franchise

• Is an existing franchise
• In a franchise,
• franchisor
• Provides support
• Ad
• Financial Advises

Risk, ownership

• Risk uncertently the profits

Stake-holder objectives

• All people With good performance With stake Stake-holder objectives
• Internal and extneral Stake-holders
• customers objectives And government

Managing workers

• More Money so that they Can pay The cost
• Affiliation And Job satisfaction
• Well motivator worker high output

Motivating work

• Motivated by personal and ecananmical
• Mechanical approach Rater than Humman

Pyramid needs

• Social Needs
• safe/secuirty Needs
• Psychological Needs

Organization

• Orgizational tructure Can pass over
• chain of command
• There are Two type Structures of Comming

Chain Types

• Tall structure
• wide Structure
• commuican
• Spans short Comtroal
• The line supervisor over departmen

Role anagement

• Organzing delegating task And resorces
• commandin making sure

Daligation

• involves And dalgatioin with Authority with Task in percucliar
• However

Imporatns

• manager
• make employyes Trusted that

Leadership Styles

• there are theee Type leadship

Author

• the manegment expects to be asked to follow all

Trade union

• Trade A the right to go the right direction

Trate union

• Is the price

Adv

• More info
• importand work Emploment

Retrucmen

• A buisness The rught process to Identify some

Buiness needs to employ

• To create oppitonite For them

Full and timee worker/ part

• Full timer
• timer
• High and Better chances of promotion
• the