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8/7/2019 REVISION UNIT 1 2 3
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Business Activity
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What is a business?What is a business?
A decisionA decision--making organization involved in themaking organization involved in the
process of using inputs to produce good and/orprocess of using inputs to produce good and/orprovide services.provide services.
Businesses exist to satisfy the needs and wantsBusinesses exist to satisfy the needs and wants
of people, organizations, and governments.of people, organizations, and governments.
Peter Drucker: the only purpose of a business isPeter Drucker: the only purpose of a business is
to create customers.to create customers.
Drucker is considered the father of modernDrucker is considered the father of modern
management and wrote nearly 40 business booksmanagement and wrote nearly 40 business books
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What do businesses do?What do businesses do?
Businesses process inputs to create goods orBusinesses process inputs to create goods or
servicesservices Goods are physical productsGoods are physical products
Consumer goodsConsumer goods purchased by general public; can bepurchased by general public; can be
durable or nondurable or non--durabledurable
Capital goodsCapital goods purchased by businessespurchased by businesses
Services are intangible productsServices are intangible products
Businesses contribute a value added thatBusinesses contribute a value added that
enhances the value of the inputs and producesenhances the value of the inputs and produces
profit for the businessprofit for the business
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How do businesses produce?How do businesses produce?
By using the factors of production:By using the factors of production:
LandLand Labor / labourLabor / labour
CapitalCapital
Enterprise / entrepreneurshipEnterprise / entrepreneurship
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How can businesses be classified?How can businesses be classified?
Businesses are classified by the stage ofBusinesses are classified by the stage of
production in which they are employedproduction in which they are employed Primary sectorPrimary sector involved with raw materialsinvolved with raw materials
Secondary sectorSecondary sector involved in manufacturing orinvolved in manufacturing or
construction using those raw materialsconstruction using those raw materials
Tertiary sectorTertiary sector provides servicesprovides services
Primary
production
Primary
productionManufacturing
ManufacturingTertiary
production
Tertiary
productionConsumers
ConsumersChain of production
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New Thinking:
Tertiary Sector
transport, energy, water (utilities)
Quarternary Sector
finance, trading
Quinary Sector
health, education, research, leisure and recreation(After Daniel Bell: 1976 The Coming of Post Industrial Society)
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Business Activity
Multiple Business Activity e.g. BP involved in:
Oil exploration and drilling (Primary)
Refining oil production of gas, petroleum, bitumen,lubricants, etc. (Manufacturing)
Distribution of petrol from refineries to petrol stations andsales of petrol to consumer (Tertiary)
Research and Development (Quarternary)
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Business Objectives
Businesses exist to provide goods or services
Whether or not they have to make a profit,businesses have to satisfy customers wants orneeds
There can be many different motivations forpeople to set up in business
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Why set up in business?
Fed up with working for someone else
Quality of life
Buzz of success
Feel in control
Financial reward
I could do better than that!
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What are Stakeholders?
Stakeholders are groups of people who have an
interest in a business organisation They can be seen as being either external to the
organisation, or internal
But some may be both!
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Types of Stakeholder
Owners (I)
Shareholders (I)
Managers (I)
Staff or employees (I)
Customers (E)
Suppliers (E)
Community (E)
Government (E)
I = Internal
E = External
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Internal and External Stakeholders
Internal stakeholders are those who are members of the
business organisation
Owners and shareholders
Managers
Staff and employees
External stakeholders are not partof the firm
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But..!
Some groups can be both internal and external
stakeholders Such as staff or shareholders
who are also local residents
Can you think of any others?
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Characteristics of Stakeholders
1. Owners and Shareholders
The number of owners and the roles they carry out differ according tothe size of the firm
In small businesses there may be only one owner (sole trader) orperhaps a small number of partners (partnership)
In large firms there are often thousandsof shareholders, who each own a small partof the business
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2. Managers:
organise
make decisions
plan
control
are accountable to the owner(s)
Characteristics of Stakeholders
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Characteristics of Stakeholders
3. Employees or Staff:
A business needs staff or employees
to carry out its activities
Employees agree to work a certain number
of hours in return for a wage or salary
Pay levels vary with skills, qualifications, age, location, types of work
and industry
and other factors
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Characteristics of Stakeholders
4. Customers:
Customers buy the goods or services produced by firms
They may be individuals or other businesses
Firms must understand and meet the needs
of their customers, otherwise they will fail
to make a profit or, indeed, survive
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5. Suppliers:
Firms get the resources they need to produce goods and services
from suppliers
Businesses should have effective relationships with their suppliers in
order to get quality resources at reasonable prices
This is a two-way process, as suppliers depend on the firms they
supply
Characteristics of Stakeholders
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6. Community:
Firms and the communities they exist inare also in a two-way relationship
The local community may often provide many of the firms staff andcustomers
The business often supplies goods
and services vital to the local area But at times the community can feel aggrieved by some aspects of
what a firm does
Characteristics of Stakeholders
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7. Government:
Economic policies affect firms costs (through taxation and
interest rates)
Legislation regulates what business can do
in areas such as the environment
and occupational safety and health
Successful firms are good for governments
as they create wealth and employment
Characteristics of Stakeholders
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Business Activity
Private Sector: Business activity owned financed andcontrolled by private individuals
Sole Traders
Partnerships
Private Limited Companies
Public Limited Companies (PLCs)
Co-operatives
Franchises Charities
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Objectives of Private Sector Business
Objectives
Survival
Share Price
Market PowerSales and Sales
Revenue
Efficiency
Quality andInnovation
Image andReputation
EnvironmentSatisficing
Social Issues
Profit
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Business Activity
Public Sector: Business Activity owned, financed and
controlled by the state through government or localauthorities
Government key departments set policy and monitor
implementation
Local Authorities County Councils,
District Councils, Parish Councils
Health Trusts
Public Corporations BBC
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Objectives of Public Sector Activity
Access
available to all regardless of location or income
Quality high quality services that do not cut corners
Affordability
services offered at prices that are cheaper than private sector or free atthe point of use
Equity
available to anyone whatever their background, status, income, class,race, religion, etc.
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Range of Business Offered by the Public Sector
RoadsAllotments Paths and Parks
Schools
StreetLighting
WasteDisposal
TradingStandards
Cemeteries
EnvironmentalHealth
Museums
and Arts
EconomicDevelopment andTourism
Planning
LicensingCare of the
ElderlySocial
Services