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The role of business

Inputs: resources necessary to produce goods and services.

  • land
  • labour
  • capital
  • enterprise

Value Added : the difference in price between the cost of materials and the cost of the product.

Outputs: the goods and services produced from utilising inputs.

Market: a place where buyers and sellers come together to exchange

  • consumer durables
  • consumer non-durables
  • services
  • industrial
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The role of business 2

Functions of a business: departments or divisions of the business

  • Marketing
  • Finance
  • Human Resources
  • Production

Constraints on Businesses:

  • competition 
  • legislation
  • the economy
  • taxation
  • inflation
  • social and environmental issues

Purposes of business:

  • source of revenue
  • source of employment
  • dividing the balance of payments
  • adding value
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Stakeholders

Individuals or groups who are affected by the operation of a business, or influence the operation of a business.

  • owners
  • employers
  • customers
  • lenders
  • suppliers
  • the community
  • the governement
  • taxation
  • employment
  • increasing exports
  • money spent on schools, roads and hospitals
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Business Resources

Essential Resources:

  • An effective business plan
  • employees
  • managers
  • finance

Other Resources:

  • USP
  • reliable suppliers
  • loyal customers
  • effective marketing
  • luck
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Business Resources 2

Personal Qualities Needed:

  • persistance and drive
  • ability to work under pressure
  • creativity and imaginiation
  • risk-taking
  • leadership skills
  • energy and enthusiasm
  • self-belief and confidence

Reasons for Business Failure:

  • failure to seek professional advice
  • lack of financial discipline
  • insufficient market research
  • inability to change
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Finance

Needed for:

  • start up
  • raw materials
  • everday expenses
  • marketing
  • expansion

Short term finance: up to 3 years

  • overdraft
  • short term loan
  • trade credit
  • debt factoring

Medium term finance: between 3 and 10 years

  • medium term loan
  • hire purchase
  • leasing
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Finance 2

Long term finance: over 10 years

  • long term loan
  • retained profit
  • sale and lease-back

Other Sources of Finance:

  • governement grants
  • venture capital and business angels

Factors Controlling Choice of Finance:

  • type and size of business
  • security
  • internal funds
  • existing levels of debt
  • relationships with banks
  • length of time involved
  • current methods used
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Human Resources

Recruitment:

Demand for labour -> nature of the job -> job advert -> selection -> appointment -> induction

Internal Recruitment:

  • cheaper
  • motivating
  • fewer and better known candidates
  • induction is shorter and cheaper
  • can lead to jealousy and resentment
  • likely to create another job vacancy

External Recruitment:

  • brings new ideas into the business
  • offer information from other businesses
  • more candidates
  • advertisement has to be drawn uo and promoted
  • can be demotivating for current employees
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Human Resources 2

Training

On-the-job Training:

  • more convenient and less time consuming
  • can be organised to fit in with the needs of the business
  • can benefit the trainer
  • effectiveness depends upon the skill of the trainer
  • bad and good habits can be passed on

Off-the-job Training:

  • can share problems abd learn others work experience
  • timings and details are outside of the business' control
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Market Research

Primary Data:

  • interviews
  • surveys
  • observations
  • test Panels

Secondary Data:

  • company sales figures
  • customer data
  • competitors
  • market research data
  • internet
  • trade publications
  • newspapers and magazines
  • government data
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Sampling

Random Sampling: every nth person selected - equal chance

Stratified Sampling: sample based on gender, age, or characteristics

Cluster Sampling: selecting a small group that represents a larger group

Systematic Sampling: sampling by formula

Convenience Sampling: likely to be local of to fit a desired group

Quota Sampling: individuals selected to mirror the total population

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