Chapter 1: 1.1 Introduction to Business Flashcards
1. Introduction to Business and Purpose of business activity 2. Classification of businesses according to output 3. Resources for business activities 4. Competition and trends
What is the purpose of business activities?
State the purpose of business.
Business activities add value and help to satisfy / meet the needs and wants of customers.
How do business activities serve / add value to the community?
State the benefits of businesses to the community.
by:
a. providing goods and services to the people;
b. contributing to the wealth of the country / contribute to the country’s economy ;
c. providing jobs for the people / creating employment / work opportunities; d. serving the interests of the community.
What are ‘needs’?
Needs are what people must have for survival / what people must have in order to continue to live. Needs are goods and services that are necessary / essential for our survival.
What are ‘wants’?
Wants are goods and services that are not necessary for our survival but which we would like to have.
Wants are what people wish to have.
Are wants necessary / needed for survival?
No. Wants are not necessary for survival.
What is the difference between a need and a want?
A need is what people must have for survival, such as food and water, while a want is what people wish to have, such as mobile phones and running shoes.
How can businesses be grouped?
How can business activities be classified / grouped?
Into two main types according to what they offer:
goods producing businesses and service providing industries.
What do goods-producing businesses do?
Produce / Make goods / products that are tangible, i.e. can be seen and touched with the use of resources such as machines and labour.
How are goods produced?
With the use of machines and / or labour.
What are some examples of goods-producing businesses?
Manufacturing: shoe factory, tyre factory, diaper factory (e.g. Yeo Hiap Seng Ltd, a leading manufacturer of food and beverage products)
Building and construction: Lum Chang Building Contractors whose projects include Bukit Panjang MRT station
Agriculture: mushroom farm, rubber / palm plantation, etc. (e.g. Kok Fah Technology Farm uses advanced agricultural systems to produce high-quality homegrown leafy vegetables.)
What do service-providing businesses do?
Such businesses provide services that are intangible, i.e. cannot be seen or touched but can be experienced, i.e. provide experiences.
Service-providing businesses perform services when sellers interact with customers.
How are the services performed?
When the sellers interact (communicate with / react to) with the customers.
What are the resources needed for a business to carry out its activities?
What must a businessman / entrepreneur make sure that he has enough to support him before he sets up a business?
Business resources: Capital, Enterprise, Land and Labour (CELL)
What is a resource?
A resource is a useful or valuable possession or quality of a country, organization or person. E.g. Singapore’s greatest resource is the dedication of her workers.
What are business resources?
They are the assets needed by a business to produce goods and services. Note: Our needs and wants are unlimited (endless / infinite) but our resources are limited.
How many main types / categories of business resources are there that an entrepreneur needs in order to produce his goods and services?
Four. They are: 1. Capital, i.e.money, buildings, equipment and machinery used to manufacture and / sell the goods and services. E.g. printing machine in a printing business, microwave oven in a restaurant kitchen 2. Enterprise, i.e. the use of business resources by the entrepreneur to start and run a business by producing goods and services in order to earn profits. E.g. entrepreneur (someone who takes risks to start and run his own business) who puts in / invests money into his business, shop owner 3. Land, i.e. the factory space, shop space, natural resources (e.g. land. rivers, forests, minerals, oil, etc.) needed to produce goods and services to meet customers’ needs and wants. 4. Labour, i.e. the people involved in the production, provision and / selling of goods and services, e.g. chefs in restaurants, tour guides in tour agencies, farmers, receptionists, bus drivers, engineers, teachers, etc.
How can I remember these four main resources?
With the acronym “CELL”. Capital Enterprise Labour Land
Is the business environment always changing and competitive?
Yes.
What are the main / major factors that cause the business environment to be always changing? What are the main / major factors that can either increase or decrease the rate of business growth?
They are: 1. Political and Legal… businesses must abide to the government laws and regulations which can either help them to grow or stop them from selling their goods and services. 2. Economic… Businesses are affected by how well the economy is doing, whether many or few people are looking for jobs (i.e. the number of people finding jobs) employment / unemployment rate), as well as how fast the prices of goods and services are rising (i.e. the rate of the increasing prices of goods and services / inflation rate). 3. Sociological / Social… People’s customs and attitudes affect the types of goods and services they buy (i.e. demographic / people of different customs, attitudes, genders and age groups will desire and buy different goods and services.) 4. Technological… New technologies create new products and make improvements to existing products (i.e. products can be created and improvised by new and improved technologies.)
How can I remember these four main factors that cause the business environment to changing all the time?
By the acronym PEST. Political Economic Sociological / Social Technological
Is there any other factor that can either increase or decrease the rate of business growth?
Yes… Global conditions… Businesses will not be able to sell their goods and services overseas / internationally if wars or civil unrest break out in other countries.
Do businesses need to compete with one another in order to sell their goods and services to their customers?
Yes.
What types of competition can / do businesses face?
- Direct competition
- Indirect competition
What is direct competition?
Direct competition refers to the business selling the same or similar products or services as the competitor (i.e. when two businesses sell the same or similar type of goods or service).
In which businesses is direct competition common?
- Fast food restaurants… e.g. Burger King is a direct competitor of McDonald’s and Carl’s Junior.
- Petrol Companies… e.g. Shell is a direct competitor of Esso and Caltex.
- Cinemas… e.g. Golden Village is a direct competitor of Eng Wah and Shaw
- Taxi companies and private-hire car companies, e.g. Comfort vs GoJek and Grab because both provide private transportation on demand.
Note: The businesses in each of the examples given sell very similar goods / services but their brands are different. That is where they are unique / special and they focus on trying to sell their ‘name’ / brand more than the product itself.
What is indirect competition?
Indirect competition refers to when two businesses sell different types of goods or services but they satisfy the same needs or wants of the customers. Or The business sells products that satisfy the same needs of the customers as the competitor. However, the products fall under different categories.
What are some examples of indirect competitors?
- Movie industry: a cinema vs a video rental store (e.g. Video Ezy vs Golden Village / Cathay chain of cinemas).
- Food industry: a Chinese food stall vs a supermarket / a Western food stall / restaurant (e.g. Tong Seng Chinese Cooked Food Stall vs Cold Storage’s uncooked food).
- Cinemas vs providers of escape room games as both satisfy customers’ wants for entertainment
Note: Both businesses in each example satisfy the customers’ needs in the same industry but they do so differently.
What are customers’ / our needs and wants like in real life?
Customers’ needs and wants are unlimited in real life and they will continue to increase.
Are businesses able to produce enough goods and services to satisfy our needs and wants?
No.
Why can’t businesses produce sufficient goods and services to satisfy our needs and wants?
This is because / Businesses can’t produce sufficient goods and services to meet our needs and wants because their resources are limited. Unlimited Needs and Wants VS Limited Resources
Since business resources are limited, what do businesses do / what can businesses do?
Businesses have to decide on how to allocate / distribute the limited resources in the best possible way (i.e. the most efficient way) in order to satisfy their customers’ needs and wants while at the same time, bring to them (i.e. the businesses) the most profit.
What does an entrepreneur need money for when he starts a new business?
An entrepreneur needs money to buy machinery, raw materials, office furniture, computers and other things when he starts a new business.
In which other areas would the entrepreneur also need money for?
He would also need money to pay his employees salaries, rent and utilities.
Where does the entrepreneur get his money from? Where do the entrepreneur’s financial resources from?
The financial resources may come from: 1. Personal Savings, i.e. the money he has saved over the last few years. 2. Loans from family members and friends, i.e. borrowing on a friendly basis. (What is the advantage of borrowing money from family members and friends? There is no need to pay interest.) 3. Trade Credit from Suppliers (i.e. suppliers are paid only after an agreed period of time.) 4. Bank Loans / Loans from Banks
How are loans from banks obtained?
Bank loans are obtained by making an official loan application to a bank.
What is the disadvantage of obtaining a bank loan?
The borrower will have to pay interest. As long as the loan is not repaid, the entrepreneur will have to pay interest.
What is a business?
A business is an organisation set up by one person or a group of people to meet the needs and wants of customers.
