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Ch-1: ENTERPRISE - The Transformation Process - In

All businesses are involved in transformation process. Inputs are transformed in some way to produce outputs.


1. Land: Choosing the location of the business. The significance of land as an input will be particularly high in the primary sector and businesses such as shops and cafes. Premises are also included. It affects how much can be produced or how many consumers can be entertained. Premises also affect motivation and working environment.

2. Labour: Quality of employees in term of their skills, their attitudes (e.g. to customers), their attitudes, their willigness to work and their natural abilities will have an influence on the success of any business. People can be a crucial element of the transformation process.

3. Capital: It means the equipment used by business. The amount and quality of equipment in a business can affect the service it provides.

4. Intellectual Capital: Intellectual capital involves the intelligence of the workforce. Devleloping ideas, finding new solutions to problems and spotting business opportunities. Success also depends on how the resources are used, not just many we have. The choice of inputs and who supplies them can affect: the costs and the quality of the final product.

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Transformation process - outputs


there are two types of outputs: 

1. a good is a tangible item. It is a physical item which can be produced and stocked in advance of demand.

2. service is intangible. education, creating music etc. are services. developed economies are in service sector. they cannot be produced in advance.

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more about transformation process

businesses need to identify exactly what they want to provide in temrs of the range and quality of offered products. Businesses need to find a way of generating a product that customers value so much that they will pay more for it that it cost to make. There are different types of transformation processes:

1. changing the characteristics of material, information or customers

2. changing the location of materials and information

3. changing the ownership of material. consumers buy from retailers who buy from wholesalers who buy from different producers.

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tp - continued

these things need to be considered when deciding on transformation process:

1. what level of output will be provided

2. what quality of service will be provided

3. how will you provide the service

4. what aspects of the process will the business undertake for itself and what elements will be outsourced to or bought in from other providers. 

The transformation is ongoing and dynamic. Change may be due to both internal and external factors.

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Creating value

value is created when outputs are produced that are worth more than the inputs brought in to provide them.

to increase value, a business might:

1. reduce the costs of producing the product

2. increase the perceived benefit of the product in the eyes of the customer.

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businesses and econ activity

business are important becuase they employ people, they pay them and they provide goods and services. when businesses do well, they employ more people and generate more income for the economy. businesses therefore drive economies forward and this is why governments are eager to help new firms start up and compete.

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Opportunity cost and choice

whenever decisions are made about what to produce - whether it will the free market or the government - it will involve an opportunity cost.

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business envirnoment

businesses do not operate in isolation. they are affected by many external factors:

1. political and legal issues

2. econ issues

3. social issues

4. technologicla progress

these factors are also called pest.

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Success criterias for a business

to succeed, a business must be more competitive that its rivals. this depends on:

1. the benefits offered

2 what price is being charged compared to competitors

Even if business do manage to become competitive, they cannot afford to rest because competitors will soon follow their lead; this means they need to keep improving and seeking ways of becoming more competitive.

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causes of business failures

businesses fail when competitivness is lost. this can be due to external reasons. this can be becuase of choice of inputs or choice of outputs. 

Many business fail early because: 

1, the management may not have had much experience of business

2. they lack market power, which causes difficulty in survival

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enterpreneurs - risk and reward

enterpreneres are prepared to take risks. the danger is it will not work and all investment will be lost. the real risk is losing everything. so causes of risk are external. the risk could also be internal. the expected rewards must justifty the risk involved.

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why become an enterpreneur

experiencing satisfaction

being own boss

keeping the rewards

more control over what to and when to do it compared to working for someone else.

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entrepreneurial qualities needed for success

prepared to work hard

having a vision

willing to take risks


well rounded

ability to bounce back


result oriented

professional risk-taker

totally committed

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governments, enterpreneurs and economy

governments like enterprenuers becuase they set up new businesses. 

this keeps unemployment low, taxes are paid, created competition for existing producers forcing them to improve quality and this gives customer more choice.

businesses find solutions to problems. innovation leads to new products and economic growth. 

Governments can help entrepreneurs by giving them access to advice and useful information, funding them with grants and providing legal protection for new ideas. 

if a country is said to an entrepreneurial culture, this means that entrepreneurs are highly valued and respected.

The number of regulations in a country have a siginificant impact on the willingness and ability of people to start up in business.

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social enterprise

not all business are set up with profit in mind. social enterprise are businesses that have social aims and which trade in order to benefit the community or society in general. the number of social enterprises is increasing as people become more concerned about issues such as the environment and inequality.

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triple bottom line

profit is an important measure of success. profit can be used to reward investors or to invest in the business. profit is therefore a financial measure of success.

but, businesses may have several objectives at any one moment.

business performance should be measure by profits, how the business treats People and its impact on the planet. This is as the triple bottom line

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