Unit 1: Business activity Flashcards
What are wants and needs?
Wants are what customers desire, but they are not essential for survival.
Needs are necessities to survive.
What is value adding?
Value is added to basic raw materials by businesses. The process of transforming raw materials to finished goods is the value addition.
Selling price - raw materials = value added.
Example of value adding.
Coffee cherries -> Pick out the coffee beans -> Dry -> Choose well dried beans -> Packing -> Sending to a factory -> Packed in jars -> Labeled -> Sent to shops -> Presented in shops.
Scarcity
The world’s resources are scarce in relation to people’s wants and needs, decisions have to be made.
Goals of Private vs Public enterprise
Private enterprise aim for higher profits, and in order to achieve that, the entrepreneur has to make risky decisions. They also want to build a strong brand reputation and to win their customer’s loyalty. E.g. Sony
Public enterprise have the government as their major employer. Their goal is to provide an essential economic service for the nation. E.g. Train service.
What are the 3 main type of business activities? Explain.
Primary Sector: Extractive industries that extract natural raw materials. E.g. miming, farming, fishing.
Secondary Sector: Manufacturing and construction industries. Taking the products from the primary sector and processing them to make finished goods. E.g. Making Furniture, Cars, Chocolate.
Tertiary sector: Doesn’t provide tangible products. Provides services. E.g. banks, tourism, transportation.
What are the units of measuring the size of the business?
Number of employees
Level of sales turnover
Market share of the business
value of the capital employed
What are the draw backs of these types of measurements?
Number of employees: Nowadays workers are replaced with machinery
Level of sales turnover: The products might not be of high quality.
Market share of the business : If the business is not successful and is at a lost, having a large market share off that business would not be advantageous.
Value of the capital employed: The business could still be paying back the value of the capital. Or the capital might not have been used for the right purposes.
Why do the sector of business vary in developing countries?
Countries at the early stage of development usually have a high population in primary sector. This is because most people are engaged in agricultural activities. As a country begins to develops an industrial base there is an increase in the secondary sector. An increase of machinery on farms requires little people. People tend to move and work in factories. When a country becomes more economically developed, there is a greater demand for services such as education, health care and tourism. Therefore tertiary sector undergoes growth. By this time machinery might have replaced people in the factories. People would also work rather work in the tertiary sector because there are better conditions and better payment.
What are the two types of business growth and explain them?
Internal growth: Organic growth where the business reinvests its profits.
External growth: When a business merges with another business or takes over a smaller business.
