1.1 What is a business?

The purpose of a business: Produce goods or services that meet customer needs while adding value.

Definitions of command words

• Goods: physical product
• Services: intangible products (cannot be stored, touched, etc.)
• Profit: money gained excluding costs; revenue – cost
• Revenue: Total money gained (price of product x quantity sold)
• Expenses (cost): money required to do an activity
• Inventory/stock: storage place for products waiting to be sold
• Strategy: method chosen due to benefit it provides
• Customer vs Consumer: Customers are individuals or organizations that buy a product, while consumers actually use the product.

Business

An organization which transforms inputs into outputs and waste and increases the inputs' value; this makes consumers want to purchase it, as it is worth more than the resources used to produce it.

Resources inputs

• Financial: capital which funds the process of production
• Human: work force which carries out production
• Physical: materials, equipment, premises to use in production

The main business functions

• Human resources: organizing, managing, and developing workers/employees effectively handling all staff
• Marketing: Identifying customers' needs and wants to attract and retain customers
• Finance: Managing financial resources and ensuring financial stability so businesses can operate
• Operations: Management of core activities and production process of goods and providing services from available resources to meet customer needs and wants

The different business sectors

• Primary: extraction of raw materials e.g. mining
• Secondary: processing of raw materials and manufacturing of goods
• Tertiary: service sector dedicated to providing services for customers and other businesses (selling)
• Quaternary: provision of knowledge-focused services e.g. research and education

As countries develop, business sectors tend to change accordingly: Primary -> Secondary -> Tertiary -> Quaternary (LEDC -> MEDC)

Entrepreneurship

An entrepreneur is a person who is willing to and able to create a new business idea or invention and take risks in pursuing success.

• Organize resources necessary to start and operate a business
• Make business decisions that determine the success of a business
• Take risks

Intrapreneurship

The act of promoting entrepreneurial thinking and behavior within an already existing business -> requires encouragement to grow within a business e.g. bonus checks

It helps drive innovation and growth.

Business tools

SWOT

Is a framework used to evaluate a company's competitive position and to develop strategic planning. It considers both internal and external factors.

• Strengths (internal)
• Weaknesses (internal)
• Opportunities (external)
• Threats (external)

STEEPLE

Is a framework used to measure external factors of the business environment to help determine strategic planning and decision-making.

• Social
• Technological
• Ethical
• Economic
• Political
• Legal
• Environmental

Starting up a business

Reasons: (opportunities)

• Earn money, live happily and gain stability to survive
• Financial gain of money
• Work-life balance: you chose your own work schedule
• Innovative idea which fills a gap in the market
• Opportunity to follow an interest and passion in life
• Social/environmental problem solving while also earning a living (ethical stance)
• Independence and control: you are your own boss
• Home working: flexibility

Steps (not in order):

• Research the market, customers, and trends
• Prepare a business plan which sets out key aspects of a business and how the owners intend it to develop
• Decide the type of organization and register the company: establish legal existence
• Decide location
• Hire employees
• Find funding (capital investment)

Challenges:

• Under/lack of funding
• Lack of market demand
• Competition: difficult to penetrate market and attract customers
• Lack of planning
• Hiring skilled workforce
• Time management
• Scaling up too quickly: not being able to manage increased demands
• Managing all the business operations e.g. marketing

Factors of production

Collective term for the resources used in the production process

Unique selling point

Feature that differentiates a product or organization from its rival products and competitors