Business

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CHAPTER 1

Needs and wants (factors of production & division of labour)

Needs (Necessary for living)

Food

Water

Clothing

Shelter

Oxygen

Medication

Wants (things you would like to be able to buy and own)

Education

Luxurious clothing

Electronics

Cars

Well payed jobs

Pets

Vacation

Medication

Business

Definition: An organisation which produces products or services, the aim of businesses is to satisfy the needs and wants which consumers have.

A products is a tangible good

A service is intangible

Factors of production

Capital: Used for investing in machines and equipment to produce products (money)

Enterprise: The people who take the risk and have the ideas to set up a business and make decisions

Labour: Men and women working in the business. Manual labour ; service labour

Land: All the natural resources used to make something. Used for agriculture and natural resources, raw materials

Adding value

Adding value: The difference between the price of the finished product/service and the cost of the inputs involved in making it.

Ways to add value

Build a brand (nike)

Deliver excellent customer service (hotels)

Add product features and benefits that customers want (updates)

Operate efficiently - able to work well - sell more / make more money

Benefits of adding value

Charge a higher pricer - branded - more durable - become the price maker make everyone else the price taker

Create a point of difference with competitors

Protection against competition offering lower prices

Focusses business on its target market segment

Signs that a start up is adding value

Strong gross profit margins

- Gross profit/ total sales

- A strong signal

Repeat custom

- Sign of satisfied customers

- Suggests customers feel they are getting value for money

Brand or name recognition

- Important for word of mouth recommendation