Understanding Business Activity

Understanding Business Activity

• Needs refer to essential goods and services required for survival.
• Wants are non-essential goods and services people desire.
• The basic economic problem is scarcity which arises from unlimited wants exceeding limited resources.
• Resources are also known as factors of production including land, labor, capital, and enterprise.
• Land encompasses natural resources.
• Labour refers to human mental and physical efforts.
• Capital involves man-made goods used in production.
• Enterprise represents the risk-taking ability of an entrepreneur.
• Opportunity cost is the next best alternative forgone when making a choice due to limited resources.

Specialisation

• Specialisation occurs when individuals or businesses focus on excelling in specific tasks.
• Division of labour involves splitting production into tasks performed by different workers.
• Workers specialized in certain tasks leads to increases in efficiency.
• Wasted time can be reduced because less time is wasted from one workbench to another, leading to more efficiency
• Increased efficiency may lead to economies of scale as the business is more efficient and output increases.
• Mistakes are reduced as workers become more skilled and experienced.
• Doing the same job can bore workers which can result in falling efficiency.
• Productivity can fall if employees have to rely on each other to produce products.
• Efficiency might fall if a worker is absent as no other worker can do the job.

Purpose of Business Activity

• Businesses combine limited factors of production to create goods or services.
• Businesses also employ workers and give them wages which allows them to purchase as well.

Added Value

• Added Value = selling price - total cost
• The added value is not the profit because added value does not include the price to pay for labour, and transport
• Added value is the difference between selling price and the cost of raw materials and components bought in.
• To increase added value, businesses can increase the selling price while keeping material costs constant.
• A business can also increase added value by decreasing the total cost of materials.
• Improved packaging can increase attractiveness contributing to added value
• Adding unique features that make products more appealing and providing higher quality goods and services can increase added value.
• A brand image can be created to increase added value

Classification of Businesses

• Primary: involves extracting natural resources such as farming and fishing.
• Secondary: consists of manufacturing and producing goods such as car manufacturing.
• Tertiary: focuses on providing services like hairdressing and banking.
• Sectors importance in an economy depends on the number of workers and the value of output.
• Deindustrialisation arises when the secondary sector declines.
• Depletion of primary resources and cheaper goods from developing countries contribute to deindustrialisation.
• Deindustrialisation can occur due to increased ability to spend income on services.

Mixed Economy

• Mixed economies feature both private and public sectors.
• Private Sector: Businesses NOT owned by the government aim to make profits and decide what to produce.
• Public Sector is owned by the government and makes decisions on services like education and will aim to provide a service to customers.
• Privatization refers to selling a public sector business to the private sector.
• Private sectors is more efficient to provide good quality goods.

Enterprise, Business Growth & Size

• Entrepreneurs organize, operate, and take risks to improve businesses.
• Entrepreneurs display characteristics like innovativeness and independence as well as being hard-working, creative, effective communicators, optimistic and self-confident.
• As an entrepreneur you are not able to choose how to use your time and money
• Personal ideas can be put into practice by an entrepreneur.
• Becoming successful and profitable is an advantage if businesses grow.

The Size of a Business

• Investors, government, competitors, workers, and banks all need to know the size of a business.
• It will cost entrepreneurs their own money.
• As an entrepreneur you must invest your own savings and find sources of finance.

Business Plans

• Assist entrepreneurs by helping them gain finance and plan ahead.
• Banks will ask a business for a business plan before agreeing to a new loan or overdraft.
• Failing in your business is reduced by planning ahead which will cause failure.
• Business plans consists of business objectives details about the ops, finance and owners.

Government Support for Start-Ups

• Governments encourage start-ups to reduce unemployment, drive competition, increase output, and grow future businesses.
• Governments support entrepreneurs through business advice & help, may lend finance at low rates or grants, and support training, providing training for employees to be more efficient and productive, and access to research facilities.

Business Size

• Business size measurements are: the people employed, the value of output and sales, and the value of capital employed.
• Some businesses employ few yet produce high output values.
• The value of output does not mean the business is big.
• Some companies use cheap labor giving low output with low-cost equipment.
• Businesses may use more than one method.

Business Growth

• Businesses grow for higher profits, status for managers, economies of scale, and increased market share
• Businesses grow through internal or external methods

Internal Growth

• Internal growth occurs when a business expands operations.
• External growth involves business takeovers or merges.

External Growth

• Horizontal Integration - firm taking over/merging with another firm in the same industry.
• The company's benefits include economies of scale, and market share.
• Vertical Integration involves firms taking over/merging with another firm in same industry but different production stages.
• Conglomerate Merger involves firms merging or taking over another firm in a different industry.
• The problems include difficult to control, and manage the business.
• The risks can be spread, and there can be transferring of ideas.

Why Small Businesses Fail

• Established by inexperienced youngsters will do is repay money to begin or will success
• Start-ups have less information to makes informed decisions
• Young entrepreneurs may have a unrealistic picture of the market, money management will fail, lack of finance and competition.

Sole Trader

• Sole traders are owned by one with less legal restrictions easy to set up.
• Sole traders are their own boss, has the freedom to choose their own holidays, work hours, prices, who to employ
• Capital is usually provided by the owner, hard to get capital to expand in the firm.
• The business may be small, has unlimited liability, cannot discuss business with anyone with has the same business identity as the owner, is unincorporated.

Partnerships

• Easy to set up with more capital invested with limited liability and partners have motivation because they both share responsibilities.
• Is unincorporated partners can disagree, the amount of how often they share out all the capital and tasks as well as how long a partnership will last.

Private Limited Company (LTD)

• An LTD shares can be sold shares incorporated to friends and family has a separate identity from owners company accounts are separate.
• A shareholder buys shares which means they part ownership
• Dividend is the amount of profit each shareholder gets.
• Rules for shareholder meetings directors and the job voting rights and how accounts are recorded must have
• They are useful for family businesses.

Public Limited Company (PLC)

• A PLC is similar to LTD only shares can be sold to the public
• They attend an Annual general meeting where they may vote for the board of directors.

Joint Venture

• A joint venture is when you and more businesses start a project over sharing capital risks and profits.
• Cost is shared good for expensive products knowledge to the businesses is shared risks. -Profit has to be shared if the project is successful, my have disagreement over important decisions have different methods of running business.

Franchise

• Franchises are about agreements on a business as an existing brand this is where a franchisor supports some things like advertisement financial advice Employee Training legal advice.
• The franchise has to pay the brand money to be able to sell.
• Franchise agreement can last from 5-20 years.

Risk, Ownership and Limited Liability

• Risk are events that could cause business to fail also meaning the uncertainty and profits owners partnership
• Liable is how much the shareholders in a company are liable for debts inside the business.

Stakeholder Objectives

• A stakeholders is an any with a directory interest the performance of a business.
• Internal Stakeholders the owners and workers External stakeholders are customers and banks
• Customer objectives want quality products for value good service, government objective include money from taxes bank objectives are to profit and have interest.
• Managers have to provide to to the best objective for consumers and owners.

Motivating Workers

• There are well motivated workforce for business why: to have money, job security, social skills.

Key Motivation Theories

• F.W.Taylor individuals with their motivated by person again only focused on economics. Abraham motivation.

Motivation

• Hygiene factors and hygiene are factors to reduce status recognise.

Methods of Motivation

• 3 factors that have in motivate an employee is finance rewards non- financial rewards and rewards.

Job Satisfaction

• Can include wages to show overtime all being paid a certain way with work being appointed,
• Can be to paid by the amount of hours work, easy to claculate but people supervise may need appointed

Performance Related Pay

• Employees pay is really into the effectiveness the employee mostly use when it comes to the service sector with output.

Ways of Employee Satisfaction

• Can include work and training with that well employees and can be involved more often with them or switch the tasks.

Organization and Management

• Organized into departments that show common and the of being in that certain area.
• That shows you everything is linked with the organization employees can see work position all employees are aware of it. -Communication increases.

Role of Management

• Setting Almer, organizing and controlling.

Delegation

• Means giving a task of importance to someone subordinate, this is to give the workers motivation and feel entrusted.

Business Studies

• Chain of commend structure organization instructions must be passed on to the load levels of command

Type of the Department

• With that, wide and short structure or tall structure

Trade Union

• A group of workers join together to the protected interests of the employer

Recruitment

• The process when people and identify some needs to be employment also they do make a description for qualities

Type of Worker

• A worker might work one day a week also meaning part time also with advantages there may be short time so there can be communication differences made.

Training

• Training is when you increase you were seeing skills if you need new accidents all this with the main source to be with the type of way.

Legal control employment issues

• With the safety in with this type of legal issues

Internal & External Communications

• External internal communication important with that certain way of understanding each other

Methods of Communications

• This can be verbal of non-verbal for information needed.

Communication Barriers

• Are to have problems with that the way communication certain things like the sender might be speaking wrong and the medium might be used to to find to see the type of way.

Marketing Campaign

• There to be able to find identify with the customers certain needs in order for those marketing.

Market changes

• This market needs also can be in need for changes.

Types of businesses

• The to certain types and the of business oriented certain market can research in any possible to find.

Purpose of market research

• This can need to the side of the circle who was going to this day.

Advantages

• Quality data of certain data can be gathered and customer is been to be obtained.

Disadvantages

• If not build probably. Mislead but as there may lead to the analysis as it is time

Marketing mix

• All the activity needed to be certain with the marketing certain is.

Production

• Certain types to make sure this production cost with high prices.