Presentation on theme: "Business & It’s Environment"— Presentation transcript:
1 Business & It’s Environment Ch. 1 - EnterpriseUnit 1Business & It’s EnvironmentEQ: What is the nature of business activity and the role of enterprise in setting up and developing businesses?
2 Chapter Objectives You will be able to: Understand what business activity involvesAnalyze the meaning & importance of value addedRecognize the key characteristics of successful entrepreneursAssess the importance of enterprise and entrepreneurs to a country’s economyUnderstand the meaning of social enterprise and the difference between this and other businesses
3 Purpose of Business Activity Provide a product or serviceAdd value to resources to make them more desirableW/O business we are limited to what we can make/grow ourselvesPurpose of Business ActivityA business is any organization that uses resources to meet the needs of customers
4 Business Activity uses… Scarce ResourcesTo ProduceDesirable Goods & Services
5 Purpose of Business Activity Identify the needs of customersPurchase resourcesUsing factors of productionProduce goods & servicesSatisfy needs while making $$$$Purpose of Business ActivityWhat do businesses do?
6 Key Definitions Consumer goods (items that can only be used once) physical and tangible goods sold to the public –includes durable consumer goods, (cars, houses and household appliances), and non-durable consumer goods (clothing, food, drinks, and candies)Consumer services (emotional items/services)The non-tangible products sold to the public (hotel accommodations, insurance and travel services)Capital goods (items used in production)Physical goods used by industry to aid in the production of other goods and services (machines and commercial vehicles)
7 Purpose of Business Activity Identify the needs of customersPurchase resources (factors of production)Produce goods & servicesSatisfy needs while making $$$Purpose of Business ActivityWhat do businesses need to produce goods and services?
8 Factors of Production (p.4) Resources needed by business to produce goods or servicesLandLaborCapitalEnterprise
9 Added ValueThe difference between the cost of purchasing raw materials and the price the finished goods are sold forCost of inputs/materialsProduction process adds valueValue of output of finished goods, includes the services, and ‘extras’ added during production
10 Role of the entrepreneur (p.7) Entrepreneur – someone who takes the financial risk of starting and managing a new ventureCharacteristics of successful entrepreneursInnovationCommitment and self-motivationMulti-skilledLeadership skillsSelf-confidence and an ability to “bounce back”Risk taking
11 Challenges faced by entrepreneurs Identifying successful business opportunitiesSourcing capital (finance)Lack of sufficient own financeLack of awareness of financial support & grants availableLack of any trading record to present to banks as evidence of past successPoorly produced business plan that fails to convince potential investorsDetermining a locationCompetitionBuilding a customer base
12 Why do new businesses often fail? Lack of record keepingLack of working capitalPoor management skillsChanges in the business environment
13 3 Types of businesses Primary sector - Extract natural resources Farming , fishing, oil drillingSecondary Sector - Manufacture and process products made from natural resourcesComputers, clothes making, constructionTertiary sector – provides services people needHairdressing, car repair, daycare, restaurants
14 Impact of Enterprise on a country's economy Employment creationEconomic growthFirms’ survival and growthInnovation and technological changeExportsPersonal developmentIncreased social cohesion
15 Social EnterpriseA business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximizing returns to ownersMakes money in socially responsible waysUses most of it’s profits to benefit societyARE NOT A CHARITY!
16 Social Enterprise Common features: They directly produce goods or provide servicesThey have social aims and use ethical ways of achieving themThey need to make a profit to survive as the do not rely on donations
17 Social Enterprise 3 Objectives Economic – make a profit to reinvest back into the business and give a return to ownersSocial – provide jobs or support for local, often disadvantaged, communitiesEnvironmental – to protect the environment and to manage the business in an environmentally sustainable wayTriple Bottom Line
18 Economic Activity & Choice Consumers have to choose what to buyOpportunity cost – the benefit of the next most desired option which is given upORWith limited resources, if consumers choose the iPod, then the Jordan's become the opportunity cost.