Unit 1: Entreprise Flashcards
What is the purpose of business activity?
Business is a major economic activity. It can be defined as the production of goods and
services needed by people in this world to meet their basic needs. Its purpose is to identify and satisfy the needs and wants of the people with the overall aim of earning profit.
The concept of creating value:
- Definition
- Ways of adding value (4)
- Benefits to a business (3)
Creating Value: the increasing the differences between the cost of purchasing bought-in materials and the price the finished goods are sold. To add extra features to a product and the customer is willing to pay more after the value has been added.
Ways of adding value:
- Creating a brand
- Advertising
- Providing customised services
- Offering convenience
Benefits:
- charge more to its customers
- Differentiate itself from competitiors
- brand loyalty and recognition can save advertising costs thus adding value helps cost cutting in the long run
What is the nature of the economic activity and what is the economic problem of choice and opportunity cost ?
The nature of economic activity is that there are limited resources to satisfy unlimited wants. Due to the limited resources everyone has to make choices (individuals, businesses, governments).
We have unlimited Needs and wants and there are limited resources. In economic terms we say the resources are scarce. Scarcity refers to the fact that people do not and cannot have enough income, time or other resources to satisfy every desire. Faced with this problem of scarcity, human beings, firms and governments must make a choice.
Problem of choice: businesses must make a choice on how to use scarce resources to fulfil their wants. Business must choose on whether to use labour or capital to produce their products. The business must also choose the types of goods to produce. When something else is chosen, it means something else is given up (sacrificed). Thus choice leads to opportunity cost.
Opportunity Cost-: this is the next best choice given up in favour of the alternative chosen from two choices. E.g If a business has a choice of purchasing new machinery and new premises. If the business chose to buy new machinery because of its greater utility, then the premises will be the opportunity cost.
Business environment is dynamic
Business environment is divided into two categories and these include the internal and external environment. Internal environment refers to the operating environment of the business. Elements of the internal environment are controllable and these include the firm’s organisational structure, leadership and management style, organisational resources, vision, mission, organisational culture. External environment is divided into market and macro environment. Challenges from this environment are not easy to control.
What a business needs to succeed ?
Labour- the business requires different types of workers i.e skilled, unskilled, temporary or permanent etc
Land.- the business requires the site for buildings. The business also need renewanle and non renewable resource to produce goods
Capital- the business is need of money to buy factories and machinery Customers- these are economic agents which then purchases products made
by firms
Suppliers- the business will get raw materials or other services from other businesses
Government-the government will provide roads, school, law and order and the business will benefit in one way or the other
Why business fail early on ?
- lack of experience
- insufficient capital
- poor location
- poor inventory management
- over investement in fixed assets
- porr credit arragement management
- personal use of business funds
Who is an entrepreneur?
AND Characteristics of successful entrepreneurs
An entrepreneur is an individual who organizes and operates a business or businesses, taking on financial risk to do so.
Characteristics of successful entrepreneurs:
- Self motivation
- positive attitude
- risk taker
- excellent leadership qualities
- innovator
- dependable
- resourceful
- communicators
- achievement oriented
Role of business enterprises in the development of a country
Business enterprises provide employment
They pay taxes
They increase the GDP of the country
They satisfy the needs and wants of the people
They bring foreign currency if the products are sold outside the country Reducing poverty levels
What is a Social enterprise? the range and aims of social enterprises ? (6)
Refers to a business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners. Social enterprises are businesses whose primary purpose is the common good
- They operate for the well being of the society Making profit is not the main aim
- Main aim is to solve social problems faced by people
- Profit is kept to provide more services
- They normally provide education and health Generate the majority of their
- income through trade
What are the objectives of a social entreprise ?
Triple bottom line Social enterprises have three main objectives. These aims are often referred to as the triple bottom line. Triple bottom line is used to measure the performance of a business: a. Economic (Profit) b. Social (People) c. Environment (Planet)
Benefits of social entreprises to society?
Social enterprises produce higher social returns on investment than other.
On one hand, they produce direct, measurable public benefits. A classic employment-focused social enterprise, for example, might serve at least four public aims:
Fiscal responsibility: It reduces the myriad costs of public supports for people facing barriers, by providing a pathway to economic self-sufficiency for those it employs.
Public safety: It makes the community in which it operates safer, by disrupting cycles of poverty, crime, incarceration, chemical dependency and homelessness.
Economic opportunity: It improves our pool of human capital and creates jobs in communities in need of economic renewal.
Social justice: It gives a chance to those most in need.
