The Role of Business

The Role of Business
1. Factors of Production
  1. Land - natural resources of the world; land, water, air and plants
  2. Labour - The people employed by the business
  3. Capital - man-made resources needed to make a product/service.
  4. Enterprise - Combining all factors at the hands of an entrepeneur
2. Sectors of Industry
  1. Primary - work with raw materials
  2. Secondary - use raw materials to make a consumer product
  3. Teritary - Provide a service
Types of Business Organisations
1. Private
  1. Sole traders
    1. Advantages
      1. Small and easy to set up business
      2. All profits retained by owner
      3. The owner can choose when to work and when to take holidays
      4. All decisions made solely by owner
    2. Disadvantages
      1. Nobody to share workload and responsibility with
      2. Hard to raise capital
      3. Unlimited liability
      4. Hard to achieve economies of scale
  2. Partnerships
    1. Advantages
      1. Workload and responsibility is shared
      2. Different partners offer different experience and skills
      3. Finance raised more easliy
      4. Customers and Suppliers might see a partnership as more trustworthy to deal with
    2. Disadvantages
      1. Profit is split
      2. Unlimited liability for each partner
      3. Arguments could slow decision making
      4. Legal profit-splitting document must be created
  3. Private Limited Companies
    1. Run by a board of directors who may or may not own shares. Business is owned by shareholders who all own a small piece of the company and in return receive dividends or a share of the profits.
    2. Advantages
      1. Limited liability for shareholders - they will only lose the money they have invested into the business.
      2. Finance easily raised by selling shares
      3. Shareholders and directors can bring different experience and skills
    3. Disadvantages
      1. More complicated to set up, complex legal process involved.
      2. Rules laid down by the law, The Companies Act, have to be followed.
      3. Financial accounts must be published showing their annual financial position
      4. Setting up cost can be high.
2. Public
  1. National Government
    1. UK Parliament
      1. Scottish Government
        Manages the finance of Scotland and organises Local Government Organisations to follow budgets set by MSPs in the UK parliament
      2. Decides where taxes are going to be spent and allocates budgets
  2. Local Government Organisations
    1. Made up of local elected councillors decide what to do with their budgets
3. Third
  1. Non-profit organisations
    1. Charities and voluntary organisations set up to support specific causes. They are regulated by the government and their income is put towards a specific cause.
      1. E.g. The RSPCA uses its income to prevent animal cruelty and to promote animal welfare
  2. Social enterprises
    1. Have a main social or environmental aim which they stick to.
      1. Run like a business and at least 50% of their profits are invested into their aim. Because of this they do not rely on on grants and donations
    2. E.g. the Big Issue
Customer Satisfaction
1. Providing the highest possible quality product
  1. A good quality product will impress the customer leading to satifsfaction
2. Making sure employees are properly trained
  1. Employees who are knowledgeable are trained to deal with customers will improve customer satisfaction
3. Having a customer care strategy
  1. Lets customers know the level of service that they will be provided and how complaints will be dealt with
4. Having a customer complaints procedure
  1. Allows customer problems and complaints to be handled in the best way possible
5. Having an after-sales service
  1. Gives customers the opportunity to ask questions about their recent purchase
Objectives
1. Survival
  1. Ensuring the business makes enough profit to cover its costs.
2. Profit
  1. Maximising the money the business makes
3. Provision of a service
  1. To provide people with a service they want
4. Customer satisfaction
  1. To make customers happy to encourage repeat purchases
5. Enterprise
  1. Satisfying customer needs and wants by combining resources to create a worthy product

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The Role of Business

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	Created by Callum McCadden about 10 years ago