Higher Business Management Understanding Business

Higher Business Management

Understanding Business

Sectors of Industry

Success criteria:

Introduce pupils to Business Activity, goods and services and factors of production.

Learning Intentions:

You should be able to:

• identify, describe and

•Give examples of goods and services and the factors of production.

What is a business?

A business is an organisation that exists to satisfy needs and wants for a profit.

Any activity which results in the provision of goods/services which satisfy human wants

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Business Activity

Wants Needs

Durable Non-Durable

Goods & Services

Consumer Goods

Capital

Goods

Needs and wants Needs – a need is something essential

to our lives: food, water, shelter, clothing.

Wants – a want is an additional luxury that makes life pleasurable.

Goods

Goods are tangible, physical products we can see and touch, such as cars, plasma TVs, MP3 players and iPads.

Goods can be durable or non-durable.

Services Services are things that are done for

us. They are intangible.

The police, your hairdresser and travel are examples of services.

IPO

Input Process Output

Raw materials Workers Finished Natural resources Machinery goods

Business cycle

Business cycle

Business provides goods/services

Consumers buy goods/services

Wealth for companies and employees

Consumers have money to spend from wages

Needs and wants

TASK TIMENo 1 and 2

Success criteria:

Learning Intentions:•To introduce pupils to Wealth creation for both individuals and Society•To define assets both personal and social•To look into the world’s richest and poorest economies•To introduce pupils to Input, Process and Output (IPO) and Adding Value

You should be able to:

• identify and explain how wealth is created for both individuals and society

• identify and explain what assets are• understand how wealth is created and give example• explain adding value

Wealth creation A country’s wealth is measured by how

many goods and services the country can produce.

GDP (gross domestic product) = the number of goods and services produced in a territory over a specific period (usually annually).

The more goods/services sold, the more likelihood of more jobs for the population, and therefore the more tax raised for the government.

This in turn should be invested in services for the nation.

Creating Wealth

Wealth is created at each stage of productionwhere value is added.

Adding Value – a definition

Adding value = the difference between the price

of the finished product/service and the cost

of the inputs involved in making it.

Adding Value – a worked example

Sales revenue

1000 units sold for £20,000 revenue

Costs

To make 1,000 units:

Raw materials - £7,500

Labour – £5,000

Other production costs - £2,500

Total costs = £15,000

Added Value£20,000 less £15,000

= £5,000

Adding Value – Other ways that it is gained

• Build a brand

• Deliver excellent customer service

• Add product features and benefits that customers want

• Operate efficiently

Adding Value – Benefits

• Charge a higher price

• Create a point of difference with competitors

• Protection against competitors offering lowering

prices

• Focus business on its target market segment

Adding Value – a real life example

Tyrells Potato Chips

Will Chase had been farming potatoes for 20 years (loss-making)

Wanted to produce something with more added value

Came up with the idea to make hand-fried chips with distinctive flavours and packaging

Successfully created a premium product and turned Tyrells into a profitable business

www.tyrellspotatochips.co.uk

Success criteria:

.

Learning Intentions:

To introduce pupils to Factors of Production – Land, Labour, Capital and Entrepreneur

You should be able:• To be able to identify the factors of

production and be able to describe them• To explain how the 4 factors of production

link with one another• To give examples of the 4 factors in a real-

life context

Factors of productionIn order to produce goods and services, businesses need to use resources: land labour capital enterprise/entrepreneur/ship

Factors of production Land – natural resources extracted from

Earth. Can be renewable or non-renewable. Labour – physical and mental effort of

people in organisations. Capital – synthetic resources, such as

buildings, machines and tools. Enterprise – bringing together the other

three factors of production.

TASK TIMENo 3

Success criteria:

.

Learning Intentions:

To introduce pupils to the sectors of industry – primary, secondary, tertiary/service and quaternary

You should be able:• To be able to identify the 4 sectors

of industry • To give examples of the sectors of

industry• To link the 4 sectors of industry to

IPO and Adding value

Sectors of Industry: Primary

These are extractive industrieswhich use the earth’s natural resources.

Fishermen – fish/shellfish Farmers – wheat, beef, lamb,

oranges, berries Refineries – oil, gas Coal miners – coal either finished or semi-

finished products

Sectors of Industry: Secondary

These types of businessesare involved with makingthings, which go throughseveral different stages.They use raw materials, semi-finished goods

Sectors of Industry: Secondary

Stages of Production:

Input Process Output

This involves taking raw materials or semi-finished goods and putting them through processes to make finished goods.

Sectors of Industry: Tertiary

These are service the industries and

the following are some examples:

. Banking

. Deliveries

. Nursing

. Mail deliveries

. Hair dressing/barber

. Insurance

Sectors of Industry: Quaternary

These are the industries such as .com companies andthose which are heavily involved in research and development.The following are some examples:

.Moneysupermarket.com

.Comparethemarket.com

.Skyscanner.net

Sectors of Industry(SUMMARY)

PRIMARY(Extractive)

MiningFishingFarming

Oil

SECONDARY(Making goods)

ManufacturingConstruction

DurablesNon-durables

TERTIARY(Services)

BankingInsuranceTourism

Distribution

QUATERNARY(IT companies)

.com companiesResearch

and Development

TASK TIMENo 4 and 5

Draw up a table listing everyone in your class. Find out what job/career they have in mind to follow and complete the

table. Indicate which sector of industry the career would be classified as. Describe and justify your findings eg number for each sector, explaining

why there are so few, if any, in a specific category and why most people want to work in another category.

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Task: Class Careers

Name Career Sector of Industry

De-industrialisation

Economies begin in the primary sector and move through each sector as they grow.

De-industrialisation explains the decline in heavy manufacturing in Scotland (shipbuilding, car manufacture).

The Proclaimers song ‘Letter from America’ mentions some towns that suffered due to de-industrialisation, such as Linwood. Other areas include Ravenscraig (Steelworks) and coal mining industry in Scotland.

Reasons for de-industrialisation Customer demand may change.

Increased overseas competition may mean jobs go elsewhere to keep costs low for firms.

Legislation may hamper firms.

Introduction to the command words

Explain

Describe

Discuss

Compare

Identify

Distinguish between

Justify

Outline

Every question in the examination will contain

a specific command word

Explain

Explain the cause of de-industrialisation in the UK.

De-industrialisation is caused by increased overseas competition. This means that as other countries, eg China, become more competitive jobs are lost in the UK.

Your answer must have the main theory point and then a detailed explanation of what that means.