How Businesses Work
- People set up businesses mainly to make a profit. Starting a business is risky, but there are potential financial rewards in doing it.
- People set up their own business if they expect to make more than they could earn working as an employee of another company.
- People may set up their own business so that they can be their own boss and make their own decisions.
Businesses can have Other Objectives too
- Offering the highest quality goods and services possible.
- Attempting to grow by increasing their market share, opening more outlets or taking over another business.
- Giving good customer service.
- Having a good image and reputation.
- Trying to limit their impact on the environment.
- Surviving. This is essential for new businesses, especially in competitive markets. It's also important when there's a weak economy.
Businesses might give up some profit to help them meet other objectives. However, most business owners are ultimately only interested in profit.
The size of a company has an impact on it's objectives.
How Businesses Work
Businesses have several different Functions
Production- A business turns raw materials into a finished good or service that they can sell. They must also monitor the quality of what they are producing.
Finance- Businesses have to keep a careful eye on their finances. They must keep detailed and accurate financial records. A business must try to get the best value for money for every pound it spends.
HRM- Businesses must make sure they have the right number of employees of the right quality in the right place at the right time.
Marketing- Businesses have to identify what customers want or need and figure out how best to sell it to them.
Admin- Businesses have to run their own affairs as efficiently as possible.
R&D- Businesses may need to discover new ideas for products that might be wanted in the future, and get them ready to be launched onto the market.
Businesses need to coordinate all their different functions and departments and make sure that all the departments are working towards common objectives.
What Businesses Do
Businesses Add Value to raw materials
The Supply Chain is the product's journey from Raw Materials to Consumer
Businesses can be classified by Production Stage
Primary Sector - Industries that extract raw materials from natural resources.
Secondary Sector - Processes the raw materials that come from the primary sector.
Tertiary Sector - This is the service sector.
Enterprise and Entrepreneurs
People who start businesses are called Entrepreneurs
An entrepreneur is a person who raises the resources and organises the activities needed to start a business.
Successful entrepreneurs are creative, they have perseverance, they are risk-takers, and they're good organisers and planners.
Entrepreneurs research Profitable Business Opportunities
The Government encourages Enterprise
The UK gov. encourage entrepreneurs to set up businesses because it benefits the economy (increase productivity and create new jobs).