Business Studies: Sectors and Production Factors

Business Activity

• Businesses are involved in the production of goods and services.
• The activities of a business provide jobs and create wealth.

Sectors of Industry

• Primary sector: Raw materials are produced. Examples: Farming, mining, forestry.
• Secondary sector: Raw materials are manufactured into goods. Examples: Factories, manufacturing.
• Tertiary sector: Businesses in this sector provide a service. Examples: Retailers, hotels, schools.
• Chain of production: This links the primary, secondary, and tertiary sectors, showing how a product or service is made.

Factors of Production

• Land: Natural resources needed.
• Labour: Physical and mental effort needed for production.
• Capital: Money (working capital) and fixed capital (machinery).
• Enterprise: The organizing of the other factors, having ideas for the business.

Consumers

• Definition: Final users of goods and services, at the end of the distribution channel.
• Needs: Essential items for survival. Examples: Food, water, shelter.
• Wants: Enhance quality of life; not essential for survival. Examples: TV, mobile phone, holidays.

Goods

• Definition: Tangible items; physically touchable.
• Consumer Goods: For final consumers. Examples: Cars, food, clothes.
• Producer Goods (capital goods): For other businesses to produce goods and services. Examples: Vehicles, computers, robots.
• Durable goods: Not used up quickly; last long. Examples: TV, mobile phone, machinery.
• Non-durable goods: Used up immediately or have a lifespan of less than three years. Examples: Food, clothes.

Services

• Definition: Intangible items, can't be touched. Examples: Hairdressing, taxi service.
• Personal services: For individuals. Examples: Grooming, house maintenance, car repair.
• Commercial services: For businesses. Examples: Transport, warehousing, insurance, banking.

Markets

• Definition: Where buyers and sellers exchange goods and services, often for money.

Retailers

• Definition: Businesses that sell goods to consumers.
• Small retailers buy from wholesalers; large retailers directly from manufacturers.
• Functions: Display goods; promote goods; advise customers.
• Deal with complaints; Sell goods and services; distribute goods; and provide credit.

Business Planning

• Definition: A plan outlining a business' aims, strategies, and requirements to succeed.
• It helps businesses in decision-making, convincing banks.
• Includes: Aims, cash flow forecast, owner's credentials, type of ownership, marketing strategies, location, financial information (balance sheets, profit and loss account).

Revenues and Costs

• Turnover (revenue): Income from sales of goods or services.
• Fixed costs: Remain the same regardless of output. Examples: Rent, business rates, loan repayments.
• Variable costs: Change with the number of goods produced. Examples: Raw materials, electricity.
• Total costs: Sum of fixed and variable costs.
• Profit: Difference between total revenue and total costs (when revenue is higher).

Business Ownership

• Public Sector: Government-owned organisations (NHS, police etc). Objectives: Service, accessibility, resources.
• Private Sector: Private individuals own these businesses. (Sole traders, partnerships, limited companies).
• Unlimited liability: Owners are fully responsible for business debts.
• Limited liability: Owners are only liable for the amount they invested.
• Sole trader: One owner.
• Partnership: Two or more owners.
• Private Limited Company (LTD): Owners have limited liability; shares are not available to the public.
• Public Limited Company (PLC): Owners have limited liability; shares are available to the public.
• Social Enterprises: Businesses that operate for the benefit of the community or its workers, or as a charity.
• Charities: Organisations set up to raise money to help the disadvantaged.

Partnerships

• At least two people own and run an unincorporated business.
• Advantages: More capital, extra skills, shared responsibilities, flexibility.
• Disadvantages: Disagreements, shared profits, reduced independence & loss of control.
• Deed of partnership: A legal document outlining rules of partnership, costs, and profit sharing.

Business Location

• Definition: Geographical area where a business operates.
• Site: Specific place within this area.
• Factors to consider: Availability of space, customers, cost of rent, infrastructure, access, passing trade, parking.
• Footfall: Number of people passing by a business.
• Is closeness to competitors always bad?

Business Growth

• Internal Growth: Increasing sales, revenue, profits and workforce through internal methods.
• External Growth: Acquires or merges with another business.
• Merger: Two or more businesses join together to form a new one.
• Takeover/Acquisition: One business gains control of another.
• Diversification: Entering a new market alongside the current market.

Types of Integration

• Conglomerate integration: Joining businesses in entirely different industries. Examples: Electronics and coffee.
• Vertical forward integration: Taking over a business in the later stage of the production process.
• Vertical backwards integration: Taking over a previous stage of the production process.
• Horizontal integration: Taking over businesses that produce a similar product.

Marketing Mix

• Product: What do customers want
• Price: How much will customers pay
• Place: Where will customers buy from you
• Promotion: How will you advertise your product to customers

Marketing

• Above the line: Paid promotion, examples include TV adverts, radio, newspapers.
• Below the line: Direct communication with customers, examples include loyalty cards, competitions, posters.

E-commerce and M-commerce

• E-commerce: Buying or selling online.
• M-commerce: Buying or selling through mobile devices.
• Benefits: Wider appeal and lower costs, can include data analytics → customer profiles.
• Disadvantages: Goods can't be examined, risk of fraud or misleading information, and technical difficulties.

Product Life Cycle

• The stages a product goes through from development to no longer being available on the market.

External influences

• Economic factors: Employment rates, economic climate, exchange rates, inflation, consumer spending, unemployment rate.
• International trade & globalisation: Advantages: Access to wider markets, larger pool of workers, and lower costs. Disadvantages: Competition from other businesses operating internationally, language barriers, and exchange rate fluctuations.
• European Union: Advantages: Free movement of goods & people, increase competition within and outside businesses. Disadvantages: Different regulations and rules applying throughout the trade area, could have an impact on the competitiveness of businesses.
• Employment law: Regulations cover working conditions (health and safety, working hours, pay), and employment contract terms.
• Government regulations: Taxes (VAT and income tax); health and safety legislation for workers and the business; and environmental regulations.
• Ethical considerations: Consumer and employee wellbeing are important factors affecting business decisions; environmental considerations affecting activities; animal rights issues.
• Quality standards: Enforce product quality standards and meet customer expectations to maintain standards.
• Environmental issues: Impact of a business' activities on the environment, such as pollution, energy consumption.
• Consumer legislation: Laws to protect consumers from unfair business practices.

Finance

• Costs & expenses: Fixed and variable costs.
• Revenues & income: Turnover (sales revenue)
• Profit & Profit margin: Calculation of profit, and gross/net profit margins.
• Internal and External sources of finance: Business plan and different sources of finance that businesses can use (e.g., Personal savings, bank loans).
• Cash flow forecast - Setting out a business' inflows and outflows of cash over a period of time, to show potential cash problems and help when applying for a loan.
• Break-even analysis
• Stakeholder considerations for a business.

Business Operations

• Production methods: Job, batch, and flow production.
• Stock control methods: Buffer stock and Just-in-Time
• Supply chain management: Procurement, logistics, warehousing.
• Technology: Use of information and communications technology, computer-aided design (CAD), computer-aided manufacturing (CAM), 3D-printing.
• Customer service, loyalty building.

Explore the fundamental concepts of business activities, including the different sectors of industry and the essential factors of production. Understand the roles of land, labour, capital, and enterprise, as well as the importance of consumers. This quiz will enhance your knowledge of how businesses function within the economy.