GCSE Business Studies/Business Ideas

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Business Aims[edit]

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.

The Economy[edit]

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[edit]

  • 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.

Opportunity Cost[edit]

  • 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[edit]

  • 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.