1.1: Understanding business activity

Question 1

Define the term business and explain the role of businesses in modern society

Answer 1

A business is an organization managed by one or more individuals who take initiative, calculated risks and make decisions. Resources are combined in order to provide goods or services to the market.

Question 2

Distinguish between goods and services

Answer 2

GOODS are things which you can see and touch (tangible products)

SERVICES are things which are done for us (intangible) and the buyer does not physically take them home.

Question 3

Distinguish between needs and wants

Answer 3

NEEDS are essential for survival and things that we cannot live without including food, shelter and water.

WANTS are things we would like to have and are not essential for survival including a car, foreign holidays and games consoles.

Question 4

Explain the four factors of production and how businesses combine these

Answer 4

Land: The natural resources used to provide a good or a service
Labour: The workforce used to produce a product or provide a service
Capital: The man-made resources used to provide a service
Enterprise: The idea the owner had to create the company. How the land, labour and capital is used to provide a good or a service.

Question 5

Describe the four functional areas in most businesses and the main activities within each function

Answer 5

Human resources: They are responsable for the management of the staff.
Marketing department: The anticipation and identification of the customers wants and needs. Marketing must satisfy this wants in order to make profit
Finance Department: They manage the profit that enters and exits of the company. They prevent bankruptcy.
Operation management of production department: Responsible for ensuring the best processes are done in order to produce goods and services.

Question 6

Describe the four sectors of business activity and provide examples of each

Answer 6

Primary Sector: Involved in exploting natural resources from the earth. Ex: Fish, gold
Seconday Sector: Raw materials from the primary sector are process, usually by manufacture. Ex: Clothing manufacture, car manufacture, jewelry
Tertiary sector: Business that provide a service. Ex: education, health care, transportation
Quaternary Service: Provide services that are specially focused on knowledge: Google, Apple,

Question 7

Explain how industrialisation and deindustrialisation has led to changes in business activity

Answer 7

Industrialisation: When a country economy activity grows, they become industrialized and more involved in secondary industries.
Deindustralisation: When a country losses their traditional industries.

Question 8

Explain the role of the entrepreneur and intrapreneur

Answer 8

Entrepreneur: Someone who starts its own business, combines resources, takes risks
Intrapreneur: Someone who works for a company, combines resources, takes risks

Question 9

Describe skills of an entrepreneur and outline reasons why you would want to start a business

Answer 9

An entrepreneur is: innovative, confident, determinated
Entrepreneurs would like to start their own business because:
- economically necessity
- to see if they can meet a challenge
- interest
- innovation, sharing an idea

Question 10

Explain the steps in starting a business

Answer 10

1. Organizing the basic ideas: Target market, name, location
2. Business idea throughout market research
3. Business plan
4. legal requirements
5. Raising the finance
6. Testing the market

Question 11

Describe the contents of a business plan

Answer 11

1. name and address of the business
2. Description of the product, quantity produce, price
3. The market
4. Labour
5. Methods and costs of production
6. Premises and equipment
7. Finance plan

Question 12

Explain problems a new business might face

Answer 12

• poor market research
• legal requirements not properly met
• no sufficient profit
• no brand name recognition
• competitors actions