GCSE Business Studies/Business Ideas
A business gets started when somebody decides that they can earn a profit by making goods or providing a service and selling it to people who are willing to pay for it. All businesses have the same main objective: to make a profit. A business must make a profit in order to survive. If not, it will go bankrupt and have to close down.
Businesses may have other secondary objectives they also wish to achieve, such as:
- To be the largest in their market.
- Provide the highest quality product possible.
- Expand the business.
- Maintain a high market share.
- Maintain a high customer satisfaction level.
- Limit environmental damage they cause.
An economy has two sectors:
The Public Sector
- The public sector includes everything that is owned by government.
- It includes things like the army, the police, and most schools and hospitals.
- Public sector businesses do not exist to make a profit. They exist for the benefit of everyone.
The Private Sector
- The private sector includes everything that is owned by private individuals.
- Most businesses are in the private sector.
- Private sector businesses exist to make a profit. They are run for the benefit of the people who own them.
Needs and Wants
- Businesses make a profit by providing things that people need and want.
- There is a difference between a need and a want. A need is something essential to survive. A want is something which we would like but do not need to survive.
- Humans have five basic needs: food, water, shelter, warmth, and clothing.
- Needs are only limited. Once we have these, we can think about other things we want. Wants are unlimited - we all have different ones, and we tend to want bigger and better things.
- Products are launched to fulfill the needs and wants of the consumers in the business's target market.
- A market is defined as a place where buyers and sellers meet.
- The world's resources are divided into four groups:
- Land - natural resources.
- Labour - people.
- Capital - equipment.
- Enterprise - business owners and entrepreneurs.
- There aren't enough resources to meet all of our needs and wants. (This is termed scarcity.)
- This leads to an opportunity cost.
- Consumers and businesses have to make choices when they buy things, because they do not have enough money to buy everything they want.
- The opportunity cost is the cost of rejecting the alternatives when making a selection. For example, if you only have enough money to buy a video game or a CD, the opportunity cost of choosing the game is the CD. By buying the game, you give up the opportunity to buy the CD.
- Every business decision has an opportunity cost. There is a risk that the decision will be poor and the business will make a loss. Any profit is the owner's reward for taking that risk.
Goods and Services
- In most cases, businesses will either produce goods or provide a service.
- Goods and services can both be bought; however, goods are tangible (physical objects), and services are intangible (non-physical).
- Goods and services can be put into two groups:
- Consumer goods and services are intended for the use of the ordinary public, e.g. televisions, hairdressers.
- Producer goods and services are intended for the use of other businesses, e.g. machinery, advertising companies.
- In addition, there are two types of goods:
- Durable goods can be used over and over again, e.g. fridges, trousers.
- Single use goods can only be used once, e.g. a chocolate bar, a bottle of milk.