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Ch. 1 - Enterprise EQ: What is the nature of business activity and the role of enterprise in setting up and developing businesses? Unit 1 Business & It’s.

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Presentation on theme: "Ch. 1 - Enterprise EQ: What is the nature of business activity and the role of enterprise in setting up and developing businesses? Unit 1 Business & It’s."— Presentation transcript:

1 Ch. 1 - Enterprise EQ: What is the nature of business activity and the role of enterprise in setting up and developing businesses? Unit 1 Business & It’s Environment

2 Chapter Objectives You will be able to: UUnderstand what business activity involves AAnalyze the meaning & importance of value added RRecognize the key characteristics of successful entrepreneurs AAssess the importance of enterprise and entrepreneurs to a country’s economy UUnderstand the meaning of social enterprise and the difference between this and other businesses

3 Purpose of Business Activity  Provide a product or service  Add value  Add value to resources to make them more desirable  W/O business we are limited to what we can make/grow ourselves business A business is any organization that uses resources to meet the needs of customers

4 Business Activity uses… Scarce Resources To Produce Desirable Goods & Services

5 Purpose of Business Activity 0 Identify the needs of customers 0 Purchase resources Using factors of production Produce goods & services Satisfy needs while making $$$$ What do businesses do?

6 Key Definitions 0 Consumer goods 0 Consumer goods (items that can only be used once)  physical and tangible goods sold to the public –includes durable consumer goods, (cars, houses and household appliances), and non-durable consumer goods (clothing, food, drinks, and candies) 0 Consumer services 0 Consumer services (emotional items/services)  The non-tangible products sold to the public (hotel accommodations, insurance and travel services) 0 Capital goods 0 Capital goods (items used in production)  Physical goods used by industry to aid in the production of other goods and services (machines and commercial vehicles)

7 Purpose of Business Activity 1. Identify the needs of customers 2. Purchase resources (factors of production) 3. Produce goods & services 4. Satisfy needs while making $$$ What do businesses need to produce goods and services?

8 Factors of Production (p.4) Resources needed by business to produce goods or services Land EnterpriseCapital Labor

9 Added Value The difference between the cost of purchasing raw materials and the price the finished goods are sold for Cost of inputs/materials Value of output of finished goods, includes the services, and ‘extras’ added during production Production process adds value

10 Role of the entrepreneur (p.7) Entrepreneur Entrepreneur – someone who takes the financial risk of starting and managing a new venture Characteristics of successful entrepreneurs 0 Innovation 0 Commitment and self-motivation 0 Multi-skilled 0 Leadership skills 0 Self-confidence and an ability to “bounce back” 0 Risk taking

11 Challenges faced by entrepreneurs 0 Identifying successful business opportunities 0 Sourcing capital (finance) 0 Lack of sufficient own finance 0 Lack of awareness of financial support & grants available 0 Lack of any trading record to present to banks as evidence of past success 0 Poorly produced business plan that fails to convince potential investors 0 Determining a location 0 Competition 0 Building a customer base

12 Why do new businesses often fail? 0 Lack of record keeping 0 Lack of working capital 0 Poor management skills 0 Changes in the business environment

13 3 Types of businesses 0 Primary sector 0 Primary sector - Extract natural resources Farming, fishing, oil drilling 0 Secondary Sector 0 Secondary Sector - Manufacture and process products made from natural resources Computers, clothes making, construction 0 Tertiary sector 0 Tertiary sector – provides services people need Hairdressing, car repair, daycare, restaurants

14 Impact of Enterprise on a country's economy 0 Employment creation 0 Economic growth 0 Firms’ survival and growth 0 Innovation and technological change 0 Exports 0 Personal development 0 Increased social cohesion

15 Social Enterprise A business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximizing returns to owners 0 Makes money in socially responsible ways 0 Uses most of it’s profits to benefit society 0 ARE NOT A CHARITY!

16 Social Enterprise Common features: 0 They directly produce goods or provide services 0 They have social aims and use ethical ways of achieving them 0 They need to make a profit to survive as the do not rely on donations

17 Social Enterprise 3 Objectives 0 Economic – make a profit to reinvest back into the business and give a return to owners 0 Social – provide jobs or support for local, often disadvantaged, communities 0 Environmental – to protect the environment and to manage the business in an environmentally sustainable way

18 Economic Activity & Choice 0 Consumers have to choose what to buy 0 Opportunity cost 0 Opportunity cost – the benefit of the next most desired option which is given up OR With limited resources, if consumers choose the iPod, then the Jordan's become the opportunity cost.


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