1. Business Management (National 5)
Understanding Business 1.1 – Business Activity
N5 Bus Man – 1.1: Business Types © BEST Ltd

2. What is a business?
BUSINESSES are organisations that are formed to provide:
GOODS
SERVICES
GOODS and SERVICES can be:
DURABLE
NON DURABLE
CAPITAL
CONSUMER
N5 Bus Man – 1.1: Business Types © BEST Ltd

3. How do businesses provide goods and services?
PRODUCTION describes the processes that a business uses to create or develop goods or services for consumption.
Production involves the following stages:
INPUT
PROCESS
OUTPUT
Production issues include:
FACTORS OF PRODUCTION
WEALTH CREATION
CHAINS OF PRODUCTION
N5 Bus Man – 1.1: Business Types © BEST Ltd

4. Why do businesses exist?
CONSUMERS are people who buy goods and services to satisfy:
NEEDS
(UNLIMITED) WANTS
Most economies prefer to use businesses to satisfy consumers’ CONSUMPTION for the following positive reasons.
EFFICIENCY
ECONOMIC BENEFITS
SOCIAL BENEFITS
However, some people feel that certain businesses can instead cause the following negative impacts (called EXTERNALITIES).
SOCIAL COST
OPPORTUNITY COST
Externalities mean that economies should keep an eye on the activities of the businesses in them to make sure that they have more benefits than costs for the economy and the people in it.
N5 Bus Man – 1.1: Business Types © BEST Ltd

5. The Business Cycle
The process of businesses using the factors of production to produce goods and services to satisfy the needs and wants of consumers is known as the BUSINESS CYCLE.
This process is a cycle because it goes on over and over again because consumers UNLIMITED wants constantly create new things that businesses can produce.
The cycle means that if a business is to succeed it MUST pay particular attention to minimising its externalities and satisfying consumers unlimited wants to stop the business failing.
Consumers have NEEDS and (NEW and UNLIMITED) WANTS.
Businesses identify consumers NEEDS and WANTS and decide to make GOODS and SERVICES to satisfy them.
THE
BUSINESS CYCLE
Wages from employment allow consumers to CONSUME goods and services.
Businesses employ the FACTORS OF PRODUCTION to PRODUCE the desired goods and services and increase WEALTH.
N5 Bus Man – 1.1: Business Types © BEST Ltd

6. Satisfying Consumers
To ensure that a business is able to continue to provide goods and services that will satisfy unlimited wants they must try to do the following.
FIND OUT WHAT CONSUMERS WANT
DESIGN SUITABLE PRODUCTS
PRODUCE PRODUCTS TO A PROPER STANDARD
TREAT CONSUMERS IN A POSITIVE WAY
MANAGE THE MONEY OF THE BUSINESS
The main way that many businesses try to achieve these things is by employing the following different specialised workers (known as FUNCTIONAL DEPARTMENTS or AREAS) to each take on some of these jobs.
MARKETING
OPERATIONS
HUMAN RESOURCE MANAGEMENT (HRM)
FINANCE
N5 Bus Man – 1.1: Business Types © BEST Ltd

7. Are all businesses the same?
Despite the fact that all businesses are set up to satisfy needs and wants by providing goods and services, there are many differences between individual UK organisations in the following areas.
SIZE
OWNERSHIP and PURPOSE
OBJECTIVES
OUTPUT
Many businesses record their specific activities in a document called a MISSION STATEMENT to help people understand what is does and think POSITIVELY about it.
Information about the differences between businesses is very important because they will affect the way it is MANAGED and run.
N5 Bus Man – 1.1: Business Types © BEST Ltd

8. Types of Business – Size
Business size can be measured in a variety of different ways, but one of the most common measurements involves the number of workers employed.
Therefore, the main types of business by size are:
SMALL BUSINESS (<50 workers)
Sole Traders
Partnerships
MEDIUM BUSINESS ( workers)
Ltd Company
LARGE BUSINESS (>250 workers)
Government Agencies
N5 Bus Man – 1.1: Business Types © BEST Ltd

9. Types of Business – Ownership (Economic Sector)
Businesses can be owned and run by different people for different reasons. This creates different ECONOMIC SECTOR.
The main types of business by ownership and purpose are:
PRIVATE (private owners for profit)
Sole Trader
Partnership
Private Limited Company
PUBLIC (Government owned for service)
Devolved Services
Local Services
THIRD (run for benefit of specific others)
Charity
Social Enterprise
N5 Bus Man – 1.1: Business Types © BEST Ltd

10. Types of Business – Objectives
BUSINESSES exist in general to provide goods, services or assistance.
However, there are more specific reasons that owners use their businesses to provide these goods or services. These specific reasons for starting and running a business are known as OBJECTIVES, and the main objectives that exist can be seen below.
PROFIT
PUBLIC SERVICE
AID
ENTERPRISE
SURVIVAL
CONSUMER SERVICE MAXIMISATION
MARKET SHARE GROWTH
N5 Bus Man – 1.1: Business Types © BEST Ltd

11. Types of Business –Output (Industrial Sector)
Different businesses provide different types of goods and services. This creates different INDUSTRIAL SECTORS.
The main types of business by output are:
PRIMARY SECTOR (raw materials)
Farmers
Oil Workers
SECONDARY SECTOR (produce goods)
Car Manufacturer
Furniture Maker
TERTIARY SECTOR (sales and services)
Shop
Bank
Together these sectors form a CHAIN OF PRODUCTION for the whole economy.
In the UK today, the tertiary sector has become very important due to EXPERTISE and OVERSEAS COMPETITION.
N5 Bus Man – 1.1: Business Types © BEST Ltd