What Purpose do Businesses Serve?

  • Created by: Fflur Haf
  • Created on: 03-05-19 21:55

What Purpose do Businesses Serve?

Goods - Goods are physical products such as a PlayStation console or Coca Cola soft drinks.

Services- Services are non-physical performed by a business to help a customer. Snapchat is an example of this; they provide a digital platform for people to send photos to one another. They don't actually provide a physical good.

Good Services - Some businesses provide both goods and services. Restaurants, for example, provide goods in the form of physical food but also services in the form of waiters and waitresses and an atmosphere where customers can enjoy their meal.

B2B and B2C - It is also important to note that some businesses sell products or services to customers ( B2B - Business to customer) while others sell to other businesses (B2B - Business to business). DHL sells logistics (delivery and supply chain) support to other businesses like Jaguar Land Rover.

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What do Businesses Do?

Businesses can serve either customers' needs or wants. Some businesses are called distributors - they can buy products from manufacturers and all sell them onto businesses or customers.

Customers' needs - Customers' needs are things that people can't live without. For example, Severn Trent provides water to people's homes in the UK.

Customers' wants - Some businesses exist to serve customers' wants. These are the products and services that they don't need but would like to have. E.g television and jewellery.

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Why are Businesses Set Up?

Businesses may be set up to benefit other people or to benefit society as a whole. These businesses are often not-for-profit organisations. E.g. a business that is set up to provide malaria nets to people who can’t afford them in Africa. Toms is a shoe company that has social aims as well as business aims.

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Why are Businesses Set Up? 2

We have seen that businesses exist to serve customers' wants or needs and do so through supplying good or services. Businesses are set up for a variety of reasons. They are not always set up to provide or increase someone's income. A few key reasons include:

Distribute good - Businesses may be set up to distribute goods - they buy products from manufacturers and then sell these goods to other businesses or to customers.

Benefit society - Businesses may be set up to benefit other people or to benefit society as a whole. These businesses are often not-for-profit organisations. E.g. a business that is set up to provide malaria nets to people who can't afford them in Africa.

People want the good or service - An entrepreneur starts to sell a good or service that they think people will want to buy.

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Starting a Business - Risk and Customers' Wants

Starting a business involves risk. If Paul Hollywood started a business selling cakes, he would be serving customers' wants rather than customers' needs. Cakes aren't absolutely necessary for staying alive.

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The 3 sectors - Primary.

There are 3 main sectors in the economy, primary, secondary and tertiary:

Primary sector

  • The primary sector produces raw materials. These are natural resources that can be used to make products or provide services.

  • Natural resources can be:                                                                                                             Extracted from the ground like oil, coal and gas.                                                                        Collected like trees in the forestry industry.                                                                              Grown like crops in the farming/agriculture industry.

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The 3 sectors - Secondary.

Secondary Sector

  • The secondary sector manufactures goods.

  • This is the next stage of the supply chain.

  • Businesses in this sector turn raw materials into finished goods.

  • E.g. A paper manufacturer makes paper out of wood collected by the forestry/logging industry.

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The 3 sectors - Tertiary.

Tertiary Sector

  • As discussed previously these services can take a wide variety of forms and can exist to serve customers, businesses or a combination of both.

  • A simple example is the healthcare industry, which provides a wide range of healthcare services to people.

  • Another example is Facebook, which provides a social media service to customers while also providing an advertising service to businesses.

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