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N5 Bus Man – 1.1: Business Types © BEST Ltd Business Management (National 5) Understanding Business 1.1 – Business Activity
N5 Bus Man – 1.1: Business Types © BEST Ltd 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 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 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 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. Businesses identify consumers NEEDS and WANTS and decide to make GOODS and SERVICES to satisfy them. Businesses employ the FACTORS OF PRODUCTION to PRODUCE the desired goods and services and increase WEALTH. Wages from employment allow consumers to CONSUME goods and services. Consumers have NEEDS and (NEW and UNLIMITED) WANTS. THE BUSINESS CYCLE
N5 Bus Man – 1.1: Business Types © BEST Ltd 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 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 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) Partnerships Ltd Company ◦ LARGE BUSINESS (>250 workers) Ltd Company Government Agencies
N5 Bus Man – 1.1: Business Types © BEST Ltd 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 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 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.
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