The Purpose and Nature of Business Activity
- Needs: Basic and necessary things for your survival Ex: Food, Water, Shelter, Clothing etc.
- Wants: These are the unnecessary things that humans want ex: Videogames, cars, mobile phones etc. Wants are endless because as some are satisfied new wants surface.as human wants are insatiable.
- Opportunity Cost: What you give up over choosing something els Ex: Going to Nandos rather than to Mc D's. Your opportunity cost is Mc D's.
- Scarcity: Society has limited resources therefore it cannot produce all goods and services that people wish to have. This is because wants always exceed the resources.
- Specialisation: The separation of a work process into a number of tasks, with each task performed by a separate person or group of people.Specialisation results in greater efficiency and productivity. As the workers don’t have to move between jobs. This leads to lower cost of production.
Time is saved as the workers become for efficient in performing a particular job.
By doing the same job repeatedly, the workers become ‘experts’, they commit less mistakes and hence leads to less wastage.
Due to specialisation production level increases which make it possible to carry out mass production.
Specialisation is good for workers too. They master the job and can bargain for better wages.
The Purpose and Nature of Business Activity 2
- Combine factors of production to create goods and services.
- Goods and services satisfy peoples wants.
- Employs people and pays them wages so they can consume other products.
Added value is the difference between the cost of acquiring the raw materials and finished goods.
- Creating a brand: (Branding) Brands represent quality and sometimes status. Consumers are prepared to pay more for products which have a strong brand attached to it. Why does a pair of Nike sell costlier than its counterpart Puma, though the cost of production may not be much different.
- Advertising:Through advertising the business can create a strong brand loyalty among its customers and in the process charge more for its goods or services.
- Providing customised services:Business providing better quality personalised services to their consumers add more value. Consumers are willing to pay a little extra for customised services
1.3 Enterprise and Entrepeneurship
Characteristics of entrepeneurs:
Contents of a business plan:
- Business Concept
- Financial Requirements
- Current business position (owners, legal form of operation etc.)
- Major achievements/goals
- Define your market
- Pricing (Visit website: http://www.entrepreneur.com/article/38308 for details)
1.3 The methods and problems of measuring Business
Methods of measuring business size:
- Number of employees
- Ammount of capital employed
- Market Share