BUS LEARN 1 PDF

BUS LEARN 1 💵 Business & Enterprise 1.1 The Three Principal Types of Business activity Operating, Investigating,Financing What is a business/ business activity? A business is an organization that uses resources to meet the needs of cust...

BUS LEARN 1 💵 Business & Enterprise 1.1 The Three Principal Types of Business activity Operating, Investigating,Financing What is a business/ business activity? A business is an organization that uses resources to meet the needs of customers by providing them with a product or service that they demand. Most businesses will normally charge for these products and services and hope to make a profit by doing so Without businesses and their activities, we would be entirely dependent on what we can make/grow for ourselves, as some people in virtually undiscovered communities still are Who is involved in business? Customers Managers Suppliers/ creditors Owners/ Shareholders Employees Government Local community What is a business activity? Consumer goods Physical and tangible goods sold to the general public BUS LEARN 1 1  E.g: cars, washing machine, food, drinks, sweets Consumer services Non-tangible products sold to the general public E.g; hotel accommodation, insurance services, train journeys Capital goods Physical goods used by industry to aid in the production of other goods and services E.g: machines and commercial vehicles. What do business do? Business identify needs of consumers—Purchase resources/ factors of production—Produce goods+ services to satisfy needs What do business need? Factors of production: The resources needed by businesses to produce products and provide a service Land- includes not only the land itself but all the renewable and non-renewable resources of nature, for example coal and timber. Labour- manual and skilled labour make up the workforce of a business. Capital- not just the finance needed to set up a business and pay for it's continuing operations but also all the manufactured resources used in production, for example capital goods such as computers and machines. Enterprise- the initiative and coordination provided by risk-taking individuals called entrepreneurs, who combine all the factors of production into a unit capable of products and providing services. The Concept of adding value Difference between the cost of purchasing raw materials and the price the finished goods are sold for BUS LEARN 1 2  A business adds value to the raw materials it uses to produce the good or service it sells, for example a builder buying in materials and building a house. If a customer is prepared to pay a price much greater than the cost of materials , then the business has been successful in 'adding value' 1. From the value added by the business , other costs such as labour and rent have to be paid 2. Value added is not the same as profits 3. If a business can increase its value added without increasing its costs, then profit will increase Examples of adding value Jewelry Shop A well-designed shop window, attractive shop fittings, well dressed and knowledgable staff, beautiful packaging- might allow for an increase in price and thus higher profits. Sweet Manufacturer extensive advertising of the brand of sweets to create an easily recognizable name and brand identity, attractive packaging and selling through established retail outlets rather than widely available vending machine.Higher prices as a result of successful branding should add profits Scarcity when something is not say to find or get Scarcity is the fundamental economic problem of having seemingly unlimited human needs and wants, in a world of limited resources.It states that society has insufficient productive resources to fulfill all human wants and needs.Alternatively, scarcity implies that not all of society's goals can be pursued at the same time; trade-offs are made of one good against others.For example, fruits such as strawberries are scarce on occasion because they grow only at certain times of the year.When the supply of strawberries is lower, they are scarce, or not always available.If enough people want strawberries when none are available, then the demand increases.And this demand is high not because the price is low but because the supply is low BUS LEARN 1 3  Scarcity is an economic concept that refers to the limited availability of resources in comparison to the unlimited wants and needs of individuals and societies.Because resources like time, money, raw materials, and labor are finite, scarcity forces people to make choices about how to allocate these resources most effectively. Key points: Limited Resources: Resources such as land, water, energy, and raw materials are not infinite.Even time and human skills are considered scarce because they cannot be stretched indefinitely to meet all demands. Unlimited Wants: people and societies always have more wants and needs that can be satisfied with the available resources.This creates a situation where not all desires can be fulfilled. Trade-offs: scarcity necessitates making choices.When one resource is used for a particular purpose, it cannot be used for something else, leading to Trade-offs.This is closely related to the concept of opportunity cost. Economic Problem: scarcity is often described as the fundamental economic problem because it forces individuals, businesses, and governments to make decisions about how to allocate resources efficiently. Examples of scarcity: Natural resources: oil is a scarce resource.As it's consumed, the remaining amount becomes more limited, which drives up prices and forces societies to find alternatives or use it more efficiently. Time: times is s scarce resource for individuals.If you spend time studying, you have less time for leisure or work.You must choose how to spend your time based on what you value most. Money: most people have a limited amount of money, which means they have to make choices about what to but and what to forgot. Implications of a scarcity: BUS LEARN 1 4  Prices: scarcity often leads to higher prices because when something is limited, people are willing to pay more to obtain it. Prioritization: governments and organizations prioritize projects and policies based on the scarcity of resources, focusing on areas where resources can be most effectively used. Innovation: scarcity can drive innovation, as individuals and companies look for new ways to meet needs and wants with fewer resources. Opportunity cost 1. Time investments: if you decide to spend an evening working on a business idea, the opportunity cost might be the leisure time you could have spent with friends or family, or the rest you could have gotten. 2. Financial investment: if you choose to invest your money in stocks, the opportunity cost is the return you could have earned if you had invested I'm bonds, real estate, or simply kept the money in a savings account. 3. Education: If you decide to go to college, the opportunity cost could be the income you have earned by working full-time during these years instead if studying. Importance of opportunity cost: decision-making: understanding opportunity cost helps individuals and businesses make informed decisions by weighing the benefits of different options Resource Allocation: it encourages efficient use of resources by considering what is sacrificed when a particular choice is made Economic Understanding: opportunity cost is a fundamental concept in economics, illustrating the trade-offs inherent in any decision Opportunity Cost…what is it? In business terms, opportunity cost refers to the potential benefits or profits that a company misses out on when choosing an alternative over another.it is the value of the best alternative use of resources (such as time, money, or labor) that is not chosen.In essence, opportunity cost in business is about evaluating the trade-offs involved in every decision, ensuring that the chosen option delivers the most value relative to what is given up. BUS LEARN 1 5  Example of opportunity cost in business Investment decisions: if a business decides to invest in new machinery, the opportunity cost could be the returns it could have earned by investigating that same money in marketing, product development, or even a different project. Resource Allocation: when a company allocates its top talent to develop a new product, the opportunity cost is what those employees could have contributed to existing products or other areas of the business. Production Choices:if a manufacturer uses its factory to produce Product A instead of Product B, the opportunity cost is the profit it could have made from producing and selling Product B. Expansion vs. Diversification: A company may have to choose between expanding its existing operations or diversifying into a new market. The opportunity cost of expanding is the potential profits and market share that could have been gained from diversification, and vice versa. Importance of Opportunity Cost in business Informed Decision-making: understanding opportunity cost helps businesses make better strategic decisions by considering what is being sacrificed when choosing one option over another. Cost-benefit analysis:it allows businesses to weigh the potential returns of various options and allocate resources where they can achieve the highest return on investments Strategic planning: businesses use opportunity cost to evaluate long-term plans, ensuring that resources are directed towards the most valuable opportunities. Practical implications Budgeting: opportunity cost helps in deciding how to allocate a limited budget across different projects, marketing strategies, or investment opportunities Time management: companies often consider the opportunity cost of time, especially when deciding between short-term projects that deliver quick returns versus long-term projects that might offer more substantial benefits. BUS LEARN 1 6 BUS LEARN 1 7