Unit 1.2 Slides

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Unit 1.2 Slides

  1. 1. Unit 1.2 Why Do Businesses Exist?
  2. 2. The purpose of business <ul><li>To provide a service </li></ul><ul><li>To make a profit </li></ul><ul><li>For charitable purposes </li></ul><ul><li>To develop a good idea </li></ul>
  3. 3. <ul><li>What is this famous ship called? </li></ul><ul><li>It boldly goes where no-one has gone before </li></ul><ul><li>into the unknown </li></ul><ul><li>It takes risks </li></ul>
  4. 4. What is Enterprise? <ul><li>Enterprise is the art of bringing together land, labour and capital – the factors of production </li></ul><ul><li>The person who is responsible for bringing together the factors of production is called an entrepreneur </li></ul>
  5. 5. Entrepreneur <ul><li>Here is a famous entrepreneur </li></ul><ul><li>What is he famous for? </li></ul><ul><li>How did he start up his business? </li></ul>
  6. 6. Risk Taking <ul><li>Starting a new businesses involves risk. Why? </li></ul><ul><li>Because it is a venture into the unknown </li></ul><ul><li>Entrepreneurs take risks: </li></ul><ul><li>To make bigger profits </li></ul><ul><li>To increase market share </li></ul><ul><li>To survive </li></ul><ul><li>To grow </li></ul>
  7. 7. Aims of the business <ul><li>Different organisations have different aims and objectives. </li></ul><ul><li>Remember the three business sectors? </li></ul><ul><li>Private </li></ul><ul><li>Public </li></ul><ul><li>Voluntary </li></ul>
  8. 8. Private Sector Aims <ul><li>The Private sector aims are all Profit-related </li></ul><ul><li>To survive </li></ul><ul><li>To break-even </li></ul><ul><li>To maximise profits </li></ul><ul><li>To increase shareholder returns </li></ul><ul><li>To expand and grow </li></ul>
  9. 9. Public Sector Aims <ul><li>The Public sector aims are Service-related </li></ul><ul><li>To improve quality of service </li></ul><ul><li>To cut costs/break-even </li></ul><ul><li>To raise revenue </li></ul>
  10. 10. Voluntary Sector Aims <ul><li>Voluntary sector aims are all aid-related </li></ul><ul><li>To help people </li></ul><ul><li>To maximise cash collection </li></ul><ul><li>To offer more community services </li></ul><ul><li>To recruit more helpers </li></ul><ul><li>To open more branches/shops </li></ul>
  11. 11. Having an Interest in a Business <ul><li>Southsiders is a new TV soap being made. </li></ul><ul><li>It is expected to attract 15 million viewers. </li></ul><ul><li>Who would benefit from this? </li></ul><ul><li>They have a stake in the future success of the business! </li></ul>
  12. 12. Stakeholders <ul><li>Stakeholders are people with a key interest in a business </li></ul><ul><li>The main ones in business are: </li></ul><ul><li>Customers </li></ul><ul><li>Government </li></ul><ul><li>Community </li></ul><ul><li>Owners </li></ul><ul><li>Managers </li></ul><ul><li>Employees </li></ul><ul><li>Shareholders </li></ul>
  13. 13. But…..! <ul><li>Some groups can be both internal and external stakeholders </li></ul><ul><li>Such as staff or shareholders who are also local residents </li></ul><ul><li>Can you think of any others? </li></ul>
  14. 14. Owners and Shareholders <ul><li>The number of owners and the roles they carry out differ according to the size of the firm </li></ul><ul><li>In small businesses there may be only one owner (sole trader) or perhaps a small number of partners (partnership) </li></ul><ul><li>In large firms there are often thousands of shareholders, who each own a small part of the business </li></ul>
  15. 15. <ul><li>organise </li></ul><ul><li>make decisions </li></ul><ul><li>plan </li></ul><ul><li>control </li></ul><ul><li>are accountable to the owner(s) </li></ul>Managers
  16. 16. Employees <ul><li>A business needs staff or employees to carry out its activities </li></ul><ul><li>Employees agree to work a certain number of hours in return for a wage or salary </li></ul><ul><li>Pay levels vary with skills, qualifications, age, location, types of work and industry and other factors </li></ul>
  17. 17. Customers <ul><li>Customers buy the goods or services produced by firms </li></ul><ul><li>They may be individuals or other businesses </li></ul><ul><li>Firms must understand and meet the needs of their customers, otherwise they will fail to make a profit or, indeed, survive </li></ul>
  18. 18. <ul><li>Firms get the resources they need to produce goods and services from suppliers </li></ul><ul><li>Businesses should have effective relationships with their suppliers in order to get quality resources at reasonable prices </li></ul><ul><li>This is a two-way process, as suppliers depend on the firms they supply </li></ul>Suppliers
  19. 19. <ul><li>Firms and the communities they exist in are also in a two-way relationship </li></ul><ul><li>The local community may often provide many of the firm’s staff and customers </li></ul><ul><li>The business often supplies goods and services vital to the local area </li></ul><ul><li>But at times the community can feel aggrieved by some aspects of what a firm does </li></ul>Community
  20. 20. <ul><li>Economic policies affect firms’ costs (through taxation and interest rates) </li></ul><ul><li>Legislation regulates what business can do in areas such as the environment and occupational safety and health </li></ul><ul><li>Successful firms are good for governments as they create wealth and employment </li></ul>Government
  21. 21. Economic Systems <ul><li>What is the Economy? </li></ul><ul><li>A system which tries to solve the Basic Economic Problem </li></ul><ul><li>What is The Basic Economic Problem? </li></ul><ul><li>How scarce resources with different uses are allocated to satisfy wants </li></ul>
  22. 22. Types of Economic System <ul><li>Centrally Planned System </li></ul><ul><li>Free Market System </li></ul><ul><li>Mixed System </li></ul>
  23. 23. Centrally Planned System <ul><li>All economic decisions made by government </li></ul><ul><li>All firms & resources owned by Govt. </li></ul><ul><li>Decisions taken by Govt. in interest of people </li></ul><ul><li>Communist countries like former Soviet Union and the Eastern European nations used this. China and Cuba still do. </li></ul>
  24. 24. Free Market System <ul><li>Free market decisions about what is to be produced is made by the consumers and producers. </li></ul><ul><li>The government does not intervene. This is what Adam Smith called ‘Laissez-faire’. </li></ul><ul><li>Companies have to listen to customers in order to survive. If they don’t, they go bust! </li></ul><ul><li>The United States is a free market system. </li></ul>
  25. 25. Mixed System <ul><li>A mixed economy combines elements of both systems. </li></ul><ul><li>Some decisions are made by producers and consumers, while the government still make some decisions. </li></ul><ul><li>The UK is a mixed economy. We have a large private sector and a large public sector too. </li></ul>
  26. 26. Infrastructure <ul><li>Infrastructure – road, rail, air links, sewage, telephone systems and utilities which provide a network that benefits both businesses and the community </li></ul><ul><li>Building such systems require lots of capital , but can be seen as a good future investment </li></ul>
  27. 27. Balancing Costs and Benefits <ul><li>A new airport is to be built near Eaglesham. East Ren International Airport! </li></ul><ul><li>Do you think the people who live in Eaglesham, Busby, Mearns would be happy? </li></ul><ul><li>Think of some good points and bad points about this development </li></ul>
  28. 28. Key Terms <ul><li>Social Costs – bad or negative effects businesses have on the community </li></ul><ul><li>Social Benefits - good or positive effects businesses have on the community </li></ul><ul><li>Economic Costs – the cost of the business alternative given up </li></ul><ul><li>Economic Benefits – the positive, long term changes to an area </li></ul>
  29. 29. Social costs and benefits <ul><li>Costs </li></ul><ul><li>Air/noise/water pollution </li></ul><ul><li>Traffic congestion </li></ul><ul><li>Lifestyle change </li></ul><ul><li>Local services unable to cope </li></ul><ul><li>Benefits </li></ul><ul><li>Happier customers </li></ul><ul><li>Creation of jobs by business </li></ul><ul><li>Contribution to local community </li></ul><ul><li>Creation of jobs within other local businesses </li></ul>
  30. 30. Economic costs and benefits <ul><li>Costs </li></ul><ul><li>Hospital v leisure centre </li></ul><ul><li>Shopping centre v Football stadium </li></ul><ul><li>Pub v Fast Food restaurant </li></ul><ul><li>Packet of crisps v chocolate bar </li></ul><ul><li>Benefits </li></ul><ul><li>People employed </li></ul><ul><li>Wages received </li></ul><ul><li>Rise in standard of living </li></ul><ul><li>Boost to local firms </li></ul>

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