Understanding the nature and purpose of a business

Question 1

Why do businesses exist?

Answer 1

To provide goods and services for the market

Question 2

Supplier of goods and services

Answer 2

Businesses supply goods and services to consumers and businesses
Goods are tangible products which can be physically held
Services are intangible products

Question 3

Impact of a business on the country and its residents

Answer 3

Provide employment which allows individuals to earn an income and purchase goods and services
E.g. In 2019, Tesco employed around 300,000 staff
Businesses create new goods and services which can enhance the lives of consumers
E.g. pharmaceutical businesses like Pfizer have developed new medicines that cure illnesses and improve people’s quality of life
Businesses can allow a country to improve and develop the country’s reputation
E.g. many financial service busiensses in the UK provide their products to many countries around the world and this improves the UK’s reputation

Question 4

The transformation process

Answer 4

Businesses convert inputs (for example, raw materials) into outputs (finished goods) to satisfy the needs and wants of other consumers and businesses
This is called the transformation process and businesses will add value to their goods and services throughout this process

Question 5

B2C

Answer 5

Some businesses sell their goods and services directly to consumers and these businesses are known as business to consumer (or B2C) organisations
E.g. Spotify provides music streaming services and sells these to consumers. Spotify is, therefore, an example of a business to consumer organisation

Question 6

B2B

Answer 6

Other businesses sell their goods and services to other busiensses and these are known as business to business (or B2B) organisations
E.g. Hootsuite sells social media management services to other businesses such as Virgin. Hootsuite is, therefore, an example of a business to busienss organisation

Question 7

Sectors (what are they)

Answer 7

Businesses can also be categorised according to the type of product they supply:
Primary sector - extract or grow raw materials including fishing, mining and forestry
Secondary sector - Manufacture goods using raw materials e.g. clothes and mobile phones
Tertiary sector - Services e.g. hotels and cinemas