The Nature of BusinessModule 1: Chapter 1.1

What is a Business?

Business Activity cont’d

Inputs

• 4 factors of production

Processes

• 4 functional areas of business

Output

• either a good or service.

Goods Services

Purpose of a Business

Needs

Wants

Business Activity

CUSTOMER VS CONSUMER

Value Added

Marketplace

Opportunity Cost

It wasn’t until the mid 1990s that supermarkets went against government advice and began to trade on Sundays. Supermarkets in the UK realized the opportunity cost of being closed on Sundays. They were fined for such actions, as licensing to trade on Sundays had not been enacted, but the fines were so insignificant compared to the revenues that they were earning by opening on Sundays that the supermarkets continued with this practice. McDonald’s Corporation have followed by opening some 24-hours stores around the world. Banks in Hong Kong are currently contemplating opening on Sundays.a) Define the term opportunity costb) Use the case study to examine the reasons

why opportunity cost is an important concept in business decision-making.

Opportunity Cost

Factors of Production

Land

Labor

Capital

Enterprise

Inputs (resources) necessary for the

production process

Returns for Factor Inputs

Factors of Production

LAND ENTERPRISECAPITALLABOR

RENT PROFITINTERESTWAGES

INCOME

Specialization

SPECIALIZATION

• a concentration on the production of a particular output or a small range of similar products

DIVISION OF LABOR

• Specialization of workers in the provision of outputs

Adv. & Disadv.

productivityefficiency

StandardizationHigher profit

margins

BoredomInflexibility

Lack of autonomy

Capital costs

Functions of Business

Production

converting raw materials into finished goods

coordinated and monitored by the production manager

Quality Control

Finance

Managing the organization’s money

Finance manager

Informs those interested in the financial position of the business

Functions of Business

Human Resources

Responsible for managing the personnel of the organization

Likely to deal with:• Workforce planning• Recruitment• Training• Appraisal• Pay and benefits• Equal opportunities• Health and safety matters• Fostering working relations

Marketing

Responsible for identifying and satisfying consumer wants and needs

Four P’s of marketing:• Product• Price• Promotion• Place

Primary

Secondary

Tertiary

Sectors of the Economy

Chain of Production

Primary Productio

n

Manufacturi

ng

Tertiary

Production

Consumer