A business is any organisation that makes goods or provides services.
There are many types of business in the UK. These range from small firms owned and run by just one self employed person, through to large companies which employ thousands of staff all over the world.
Businesses exist to provide goods or services.
Goods are physical products - such as burgers or cars.
Compact discs are goods
Services are non-physical items - such as hairdressing.
Customer needs are the wants and desires of buyers.
Nearly half a million businesses start up each year. A business start up is a new firm operating in a market for the first time.
The vast majority of businesses are very small and operate in the service sector.
Businesses buy the products they need from suppliers – firms selling products to other businesses - and sell to customers. The individual who uses the product is called a consumer. Sometimes the customer and consumer are different people - for example, parents buy a pen for their child to use at school.
Businesses sell to customers in markets. A market is any place where buyers and sellers meet to trade products - this can be a high street shop or a website.
Businesses are likely to be in competition with other firms offering similar products
There are three main types of industry in which firms operate. These sectors form a chain of production which provides customers with finished goods or services.
Primary production: this involves acquiring raw materials. For example, metals and coal have to be mined, oil drilled from the ground, rubber tapped from trees, foodstuffs farmed and fish trawled. This is sometimes known as extractive production.
Secondary production: this is the manufacturing and assembly process. It involves converting raw materials into components, for example, making plastics from oil. It also involves assembling the product, eg building houses, bridges and roads.
Tertiary production: this refers to the commercial services that support the production and distribution process, eg insurance, transport, advertising, warehousing and other services such as teaching and health care.
The chain of production shows interdependence: firms rely on other businesses in different sectors for raw materials, components or distribution.
The skill involved in wanting to start and run a business is called enterprise. The individual who sets up their own business is called an entrepreneur.
There are several reasons why entrepreneurs are willing to take a calculated risk and set up a business. Possible motives include:
Making a profit. A business does this by selling items at a price that more than covers the costs of production. Owners keep the profit as a reward for risk-taking and enterprise.
The satisfaction that comes from setting up a successful business and being independent.
Being able to make a difference by offering a service to the community such as a charity…