1.1 - The purpose and nature of business

1.1 - The purpose and nature of business

1. Keywords

   • Good - A physical product e.g. car
   • Service - An intangible product e.g. financial advice
   • Customer - Someone who buys a product
   • Consumer - Someone who uses goods and services from a business
   • Entrepreneur - Someone who is willing to take risks involved in starting a new business
   • Entrepreneurship - Refers to the ability to be an entrepreneur
   • Social Enterprise - A business that is set up to help society rather than making a profit
   • Resources - the inputs that businesses use to provide their goods and services
   • Enterprise - Another word for business. Also refers to the skills of people involved in the business to identify business opportunities and bring together resources to meet them
   • Intrest - Is the money paid by banks as a reward to attract people to save with them
   • Inters rates - The cost of borrowing money for the reward for saving money (as %)
   • Inflation - the rate at which prices are increasing. E.G. if inflation is 2% prices generally grow by 2% that year
   • Gross Domestic Product (GDP) - measure all income earned in country's economy that year

2. What are the main purposes of a business

   • to produce goods for sale to its customers
   • Provide services for its customers

3. Entrepreneurs:

   • take risks
   • see an opportunity
   • have determination, vision, focus and motivation
   • Are their own boss
   • Keep all the profits
   • Can decide when to work

4. The chain of production

   • a diamond is mined (primary) a diamond factory will create a ring (secondary)  a jewellery shop will sell it (tertiary) This is called interdependence 
   • primary sector e.g agriculture or fishing
     • consists of growing, extracting or converting natural resources into raw materials 
     • secondary sector e.g construction or manufacturing
       • Consists of converting raw materials into products for sale to businesses and individuals 
       • tertiary sector e.g private services or public services
         • Consists of providing services to businesses and individuals 

5. 4 functions of a business

   • operations
   • marketing
   • human resources
   • finace

6. Factors

   • Land - the physical site the business is located on and other natural resources a business can use e.g. mines or crops
   • Enterprise - The skills of the people involved in the business to identify business opportunities and bring together resources to meet opportunities e.g. skill to drive a factor
   • Labour - the skills and number of staff employed by a business
   • Capital - the equipment used to provide goods or services e.g. tractor on farme's field

7. Opportunity cost - the sacrifice we make when we decide to do something e.g. spending bus fare on sweets means walking home.

   • When an entrepreneur starts a business they must sacrifice a regular wage from an employed job to a less secure income of a new business

8. The business environment

   • Technological change
     • Creates new products and markets e.g. snapchat or uber
   • Economic change
     • Interest rate changes, inflation changes and changes in gross domestic product
   • Interest rates
     • Changes in the cost of borrowing money from banks, inflation is the rate of prices of products are increasing and GDP is the income the economy is generating
   • Legal change
     • New laws and regulations that can affect how much it costs to run a business e.g. businesses must pay a minimum wage to workers
   • Environmental expectations
     • customers opinions on how a business and its products affect the environment