Unit 1: business and its environment:
0. Key terms:
- Entrepreneur: an individual who has the idea for a new business, starts it
up and carries most of the risks but benefits from the rewards
- Customer: an individual consumer or organisation that purchases goods
or services from a business
- Consumer: an individual who purchases goods or services for personal
use
o Consumer goods: the physical and tangible goods sold to
consumers that are not intended for resale. E.G. cars and washing
machines
o Consumer services: the non-tangible products sold to consumers
that are not intended for resale. E.G. hotel accommodation,
insurance services
- Factors of production: the resources needed by businesses to produce
goods and services
- Capital goods: the physical goods used by industry to aid in the
production of other goods and services such as machines and commercial
vehicles.
- Enterprise: the action of showing initiative to take the risk to set up a
business.
- Adding value: increasing the difference between the cost of bought-in
inputs (materials) and the selling price of the finished goods
- Added value: the difference between the cost of purchasing bought-in
inputs (materials)
- Branding: the process of differentiating a product by developing a
symbol, name, image or trademark for it.
- Opportunity cost: the next most desired option that is given up
- Multinational business: a business organisation that has its
headquarters in one country, but with operating branches, factories and
assembly plants in other countries
- Intrapreneur: a business employee who takes indirect responsibility for
turning an idea into a profitable new product or business venture
- Business plan: a written document that describes a business, its
objectives, its strategies, the market it is in and its financial forecasts
- Private limited company: a business that is owned by shareholders who
are often members of the same family; this company cannot sell shares to
the general public
- Initial public offering (IPO): an offer to the public to buy shares in a
public limited company
- Public limited company (plc): a company whose shares are traded on a
stock exchange and can be bought and sold by the public.
- primary sector business activity: firms engaged in farming, fishing, oil
extraction and all other industries that extract natural resources so that
they can be used and processed.
1
,- secondary sector business activity: firms that manufacture and
process products from natural resources, including computers, brewing,
baking, clothes-making and construction.
- tertiary sector business activity: firms providing services to consumers
and other businesses, such as retailing, transport, insurance, banking,
hotels and tourism.
- quaternary sector business activity: businesses providing information
services, such as computing, web design, particularly in scientific fields).
ICT (information and communication technologies), management
consultancy and R&D (research and development.
- Public sector: organisations accountable to and controlled by central or
local government (the state)
- private sector: businesses owned and controlled by individuals or groups
of individuals
- mixed economy: economic resources are owned and controlled by both
private and public sectors.
- Free-market economy: economic resources are owned largely by private
sector with very little state intervention.
- Command economy: economic resources are owned, planned and
controlled by the state
- Public corporation: a business enterprise owned and controlled by the
state- also known as a nationalised industry
- Sole trader: a business in which one person provides the permanent
finance and, in return, has full control of the business and is able to keep
all of the profits.
- Unlimited liability: business owners have full legal responsibility for the
debts of the business.
- Partnership: a business is formed by two or more people to carry on a
business together, with shared capital investment and, usually, shared
responsibilities.
- Limited liability: the only liability – or potential loss- a shareholder has, if
the company fails, is the amount of invested in the company, not the total
wealth of the shareholder
- Share: a certificate confirming part-ownership of a company and entitling
the shareholder owner to dividends and certain shareholder rights.
- Shareholder: a person or institution owning shares in a limited company
- Memorandum of association: this states the name of the company, the
address of the head office through which it can be contacted, the
maximum share capital for which the company seeks authorisation and
the declared aims of the business.
- Articles of association: this document covers the internal workings and
control of the business, the names of directors and the procedures to be
followed at meetings.
- Cooperative: a jointly owned business operated by members of their
mutual benefit, to produce or distribute goods or services- as in
consumers’ cooperatives or farmers' cooperatives
2
, - Franchise: the legal right to use the name, logo and trading system of an
existing successful business
- Franchiser: a person or business that sells the right to open stores and
sell products or services, using the brand name and brand identity
- Franchisee: a person or business that buys the right from the franchiser
to operate in the franchise
- joint venture: two or more businesses agree to work closely together on
a particular project and create a separate business division to do so.
- Social enterprise: a business with mainly social objectives that re-
invests most of its profits into benefiting society rather than maximizing
returns to owners.
1.1the nature of business activity
purpose of business activity
- meet the needs of customers by providing a product or service that they
demand
- adding value to resources
- without BA: dependent on the goods that we could make or grow
ourselves
the factors of production needed by businesses
- land- coal, crude oil and timber
- labour: manual and skilled labour
- capital- computers, machines, factories, offices and vehicles
- enterprise: provides the managing, decision-making and coordinating roles
the concept of adding values
- branding
economic activity and the problem of choice
- economic problem: there are insufficient goods to satisfy all of our needs
and wants at any one time -> we’re forced to make choices
opportunity cost
If consumers choose to buy the smartphone,
then the shoes become the opportunity cost.
The dynamic business environment
- new competitors
- legal changes
- economic changes
- technological changes
why do some businesses succeed?
- Good understanding of customer needs
3
, - Efficient management of operations
- Flexible decision making to adapt to new situations
- Appropriate and sufficient sources of finance
Why do some businesses fail?
- Poor record-keeping
- Lack of cash
- Poor management skills
Local, national and international businesses
- Local B operate in small parts of a country, often not aim to expand
- National B have branches across a country E.G. large car-retailing firms
- International B have operations in more than one country
1.2the role of entrepreneurs and intrapreneurs
qualities of successful entrepreneurs and intrapreneurs
- innovation
- commitment and self-motivation
- multi-skilled
- leadership skills
- self-confidence and an ability to bounce back
- risk-taking
innovation is important for the success of any new enterprise. Offering
exactly the same goods or services as existing businesses might not lead to
great success.
Barriers to entrepreneurship
- lack of a business opportunity
- obtaining sufficient capital (finance)
- cost of good locations
- competition
- lack of a customer base
business risk and uncertainty
- risk: can be anticipated and managed through planning and strategy
- uncertainty: cannot be quantified or planned for easily because the
outcomes and chances are unknown.
Role of enterprise in a country’s economic development
- employment creation
- economic growth
- business survival and growth
- innovation and technological change
- exports
4
0. Key terms:
- Entrepreneur: an individual who has the idea for a new business, starts it
up and carries most of the risks but benefits from the rewards
- Customer: an individual consumer or organisation that purchases goods
or services from a business
- Consumer: an individual who purchases goods or services for personal
use
o Consumer goods: the physical and tangible goods sold to
consumers that are not intended for resale. E.G. cars and washing
machines
o Consumer services: the non-tangible products sold to consumers
that are not intended for resale. E.G. hotel accommodation,
insurance services
- Factors of production: the resources needed by businesses to produce
goods and services
- Capital goods: the physical goods used by industry to aid in the
production of other goods and services such as machines and commercial
vehicles.
- Enterprise: the action of showing initiative to take the risk to set up a
business.
- Adding value: increasing the difference between the cost of bought-in
inputs (materials) and the selling price of the finished goods
- Added value: the difference between the cost of purchasing bought-in
inputs (materials)
- Branding: the process of differentiating a product by developing a
symbol, name, image or trademark for it.
- Opportunity cost: the next most desired option that is given up
- Multinational business: a business organisation that has its
headquarters in one country, but with operating branches, factories and
assembly plants in other countries
- Intrapreneur: a business employee who takes indirect responsibility for
turning an idea into a profitable new product or business venture
- Business plan: a written document that describes a business, its
objectives, its strategies, the market it is in and its financial forecasts
- Private limited company: a business that is owned by shareholders who
are often members of the same family; this company cannot sell shares to
the general public
- Initial public offering (IPO): an offer to the public to buy shares in a
public limited company
- Public limited company (plc): a company whose shares are traded on a
stock exchange and can be bought and sold by the public.
- primary sector business activity: firms engaged in farming, fishing, oil
extraction and all other industries that extract natural resources so that
they can be used and processed.
1
,- secondary sector business activity: firms that manufacture and
process products from natural resources, including computers, brewing,
baking, clothes-making and construction.
- tertiary sector business activity: firms providing services to consumers
and other businesses, such as retailing, transport, insurance, banking,
hotels and tourism.
- quaternary sector business activity: businesses providing information
services, such as computing, web design, particularly in scientific fields).
ICT (information and communication technologies), management
consultancy and R&D (research and development.
- Public sector: organisations accountable to and controlled by central or
local government (the state)
- private sector: businesses owned and controlled by individuals or groups
of individuals
- mixed economy: economic resources are owned and controlled by both
private and public sectors.
- Free-market economy: economic resources are owned largely by private
sector with very little state intervention.
- Command economy: economic resources are owned, planned and
controlled by the state
- Public corporation: a business enterprise owned and controlled by the
state- also known as a nationalised industry
- Sole trader: a business in which one person provides the permanent
finance and, in return, has full control of the business and is able to keep
all of the profits.
- Unlimited liability: business owners have full legal responsibility for the
debts of the business.
- Partnership: a business is formed by two or more people to carry on a
business together, with shared capital investment and, usually, shared
responsibilities.
- Limited liability: the only liability – or potential loss- a shareholder has, if
the company fails, is the amount of invested in the company, not the total
wealth of the shareholder
- Share: a certificate confirming part-ownership of a company and entitling
the shareholder owner to dividends and certain shareholder rights.
- Shareholder: a person or institution owning shares in a limited company
- Memorandum of association: this states the name of the company, the
address of the head office through which it can be contacted, the
maximum share capital for which the company seeks authorisation and
the declared aims of the business.
- Articles of association: this document covers the internal workings and
control of the business, the names of directors and the procedures to be
followed at meetings.
- Cooperative: a jointly owned business operated by members of their
mutual benefit, to produce or distribute goods or services- as in
consumers’ cooperatives or farmers' cooperatives
2
, - Franchise: the legal right to use the name, logo and trading system of an
existing successful business
- Franchiser: a person or business that sells the right to open stores and
sell products or services, using the brand name and brand identity
- Franchisee: a person or business that buys the right from the franchiser
to operate in the franchise
- joint venture: two or more businesses agree to work closely together on
a particular project and create a separate business division to do so.
- Social enterprise: a business with mainly social objectives that re-
invests most of its profits into benefiting society rather than maximizing
returns to owners.
1.1the nature of business activity
purpose of business activity
- meet the needs of customers by providing a product or service that they
demand
- adding value to resources
- without BA: dependent on the goods that we could make or grow
ourselves
the factors of production needed by businesses
- land- coal, crude oil and timber
- labour: manual and skilled labour
- capital- computers, machines, factories, offices and vehicles
- enterprise: provides the managing, decision-making and coordinating roles
the concept of adding values
- branding
economic activity and the problem of choice
- economic problem: there are insufficient goods to satisfy all of our needs
and wants at any one time -> we’re forced to make choices
opportunity cost
If consumers choose to buy the smartphone,
then the shoes become the opportunity cost.
The dynamic business environment
- new competitors
- legal changes
- economic changes
- technological changes
why do some businesses succeed?
- Good understanding of customer needs
3
, - Efficient management of operations
- Flexible decision making to adapt to new situations
- Appropriate and sufficient sources of finance
Why do some businesses fail?
- Poor record-keeping
- Lack of cash
- Poor management skills
Local, national and international businesses
- Local B operate in small parts of a country, often not aim to expand
- National B have branches across a country E.G. large car-retailing firms
- International B have operations in more than one country
1.2the role of entrepreneurs and intrapreneurs
qualities of successful entrepreneurs and intrapreneurs
- innovation
- commitment and self-motivation
- multi-skilled
- leadership skills
- self-confidence and an ability to bounce back
- risk-taking
innovation is important for the success of any new enterprise. Offering
exactly the same goods or services as existing businesses might not lead to
great success.
Barriers to entrepreneurship
- lack of a business opportunity
- obtaining sufficient capital (finance)
- cost of good locations
- competition
- lack of a customer base
business risk and uncertainty
- risk: can be anticipated and managed through planning and strategy
- uncertainty: cannot be quantified or planned for easily because the
outcomes and chances are unknown.
Role of enterprise in a country’s economic development
- employment creation
- economic growth
- business survival and growth
- innovation and technological change
- exports
4
