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Business activity unit_1
 

Business activity unit_1

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An overview of our learning so far.

An overview of our learning so far.

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  • Kuwait Petroleum Corporation, Coca Cola <br /> Shops, solicitors, accountants <br /> Local traders such as plumbers, small builders <br />
  • Plumbers, accountants, local shop owners, small builders <br />
  • The land itself, coal, oil, gas, metals and other minerals <br /> Crops, farms and other animals, fish and birds <br />
  • Farming, manufacturing etc <br />
  • Further activities worksheet <br /> ‘Added value for homework’ <br />

Business activity unit_1 Business activity unit_1 Presentation Transcript

  • + Business Activity Unit 1. Introduction to business activity
  • + Learning outcomes  Develop an understanding of needs, wants and scarcity  Understand the purpose of business activity  Develop knowledge of the objectives of non-profit making activity, private enterprise and public enterprise  Appreciate the concept of adding value  Definition of ‘scarcity’  The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, various economic decisions must be made to allocate resources efficiently 2
  • + What is enterprise?  The term “enterprise” has two common meanings.  Firstly, an enterprise is simply another name for a business.  You will often come across the use of the word when reading about start-ups and other businesses…“Simon Cowell’s enterprise” or “Michelle set up her successful enterprise after leaving teaching”.  Secondly, and perhaps more importantly, the word enterprise describes the actions of someone who shows some initiative by taking a risk by setting up, investing in and running a business.    3
  • + Business Activity  Businesses produce goods and services. These are the products of the business.  Which are goods and which are services? 4
  • + Business Activity 5
  • + Business Activity  Goods are things you can touch  Services are things that other people do for you 6
  • + Needs and wants  What we need and what we want can sometimes be confusing.  Often you say you need a new iPod/mobile device when in fact you want it rather than need it.  Which items do you think people need and which items do you think people want? 7
  • + Business in context  Kuwait Petroleum Corporation (KPC) is one of the world’s largest oil companies. The company makes products such as petrol and diesel from crude oil. Crude oil is oil in it’s raw or natural state. It occurs naturally in deposits within the earth. To produce the petrol that people buy from garages, KPC must first extract the crude oil from the earth. The company does this by drilling oil wells, many of which are under the sea. KPC then transports the crude oil to oil refineries where it is turned into petrol or other oil products customers want.  Individually answer the following questions: 1. What does KPC produce? 2. Does KPC produce goods or services? 3. Where can you buy KPC’s product? 4. What is KPC’s product made from? 5. Why do you think KPC produces petrol and diesel? 8
  • + Business in context 1. KPC produces oil products such as petrol and diesel. 2. KPC produces goods (products). 3. KPC’s product can be purchased at garages and gas or petrol stations. 4. KPC’s product is made from raw or crude oil. 5. Student’s own answer. Points to consider could include:  KPC has the necessary raw materials in its country.  KPC has developed the skills to extract and produce petrol and diesel. This means it could seek new locations to find oil.  There is a market for the product. 9
  • + 1.1 Activity  Think carefully about the following products and answer the questions. (a)A loaf of bread (b) An oak coffee table (c) a book 1. What are the raw materials that each product is made of? 2. Where do these raw materials come from? 3. If society keeps using these raw materials, will they run out? Explain your answer.  Definition ‘raw materials’  A material or substance used in the primary production or manufacturing of a good. 10
  • + 1.1 Answers 1. Bread is made from flour; an oak coffee table is made of wood; the book is made of paper. 2. Flour is made from wheat that is grown on farms; wood comes from trees that grow on the land; paper is made from wood and other fibres. 3. Wheat and trees are both renewable. This means that as they are used to make products, new wheat and trees can be grown. However, while a new crop of wheat can be grown every year, it takes many years for trees to grow. If these resources are used to make products faster than they can be replaced, supplies will run out. 11
  • + Demand and effective demand  Our wants influence the way we satisfy our needs. For instance, if you need food which would you choose to satisfy your need?  You may choose to satisfy your need by eating a burger because that is what you want. 12
  • + Demand and effective demand  When  You you want something, you create a demand for it. have decided that you want the new iPhone 4S. What do you require to satisfy your want? 13
  • + Demand and effective demand  To satisfy your want you will need money to pay for it as well as the willingness to spend the money on it. You may wish to spend the money on something else 14
  • + Demand and effective demand  Your demand for an iPhone 4s will not be successful unless other people want the same phone too and have the money and are willing to pay for it.  Apple would not make these products if you are the only person who wants them. The same response applies to businesses.  This is called effective demand. People create effective demand when enough people want something and are able to and willing to pay for it. 15
  • + 16 Needs and wants Needs Needs Clothing Clothing Shelter Shelter Food Food
  • + 17 Needs and wants Wants Wants Clothing Clothing Shelter Shelter Food Food Jeans Jeans House House Burger Burger Party Dress Party Dress Apartment Apartment Pizza Pizza
  • + The purpose of business activity  Businesses have been set up to produce goods and services. These goods and services are supplied to individuals and other business organisations that want them.  There are many types of business organisation. Some are major international businesses and others are smaller local businesses.  Activity: Come up with 3 major international businesses and 3 smaller businesses that operate in their own country. 18
  • + International 19
  • + National 20
  • + Regional 21
  • + Local 22
  • + Business Activity  Activity  In 1: pairs, list 3 major international businesses and 3 smaller businesses that operate in their own country and 3 local businesses. 23
  • + Activity 1.2 1. What is the main difference between needs and wants? 2. Make two lists: the first showing the things that you need; the second listing things that you want. 3. Identify 3 kinds of businesses or organisations that supply each item on your lists. 4. Select two businesses that you have identified and explain why you think that they supply the item. 24
  • + Activity 1.2 answers 1. Needs are items that we must have in order to live, whereas wants are items that we would like to have but which are not essential for us to live. 2. Student’s own answer. Needs include items such as food, water, shelter and clothing. Wants might include a certain style of clothing, a holiday, a mobile phone and so on. 3. Student’s own answer based on items identified in question 2. 4. Students own answer based on businesses identified in question 3. Reasons why the business supplies an item could be:   it wants to provide a service it has spotted a market for the product to make money. 25
  • + Private sector: private businesses and enterprises Private Sector: Business activity owned financed and controlled by private individuals 26
  • + Private sector  Self-employed  Professional  Small traders firms and large businesses  International companies 27
  • + Public sector: businesses owned and run by the government are public enterprises  Public Sector: Business Activity owned, financed and controlled by the state through government or local authorities  Government – key departments set policy and monitor implementation  Local Authorities – County Councils, District Councils  Schools  Hospitals  Libraries  Public Corporations – BBC  Transport 28
  • + Non-profit-making: a third type of enterprise  Non-profit-making organisations include charities and voluntary organisations.  These organisations are set up to fulfil a perceived social need or to provide help to a specific section of the community. 29
  • + Similarities and differences  Non-profit-making and public sector organisations have profit as a high priority  The difference between these two is that public sector organisations is run by or on behalf of the government whilst non-profit-organisations could easily be set up by private individuals who want to support a specific cause.  The government focus on enriching society and ensuring a basic standard of living 30
  • + Similarities and differences  Non-profit-making and public sector organisations have profit as a high priority  The difference between these two is that public sector organisations is run by or on behalf of the government whilst non-profitorganisations could easily be set up by private individuals who want to support a specific cause.  The government focus on enriching society and ensuring a basic standard of living  All organisations in the public and private sector are involved in some form of business activity and it is only their objectives that differ. For example: what, whom and why they produce goods and services. 31
  • + 32 Activity 1.3 1. Investigate the different types of business in your local area. You should find examples of private enterprise, public enterprise, and non-profit-making activity. 2. Identify the objectives of each. 3. Draw up a table Type Private sector Public sector Non-profit-makng Organisation Objective
  • + 33 Deciding on what to produce  Resources found on earth are finite or in limited supply such as: Crude oil Gold Aluminum
  • + Scarcity  Some resources such as air satisfy everybody’s needs but most resources are not plentiful enough for this.  Although trees are renewable you have to be careful of the amount of trees cut down taking into consideration of the time it takes for the replacement tree to grow. 34
  • + Scarcity 35
  • + Managing scarce resources  Since resources to produce goods and services are scarce a choice must be made to decide what to produce from them.  For example, furniture and houses can be made from timber so a decision needs to be made whether to cultivate trees for furniture or houses.  Similarly, if a government spends too much money on building skills then it will not be able to spend much on training extra doctors 36
  • + Cost and opportunity cost  If you want an iPod and a pair of shoes but only have enough money to buy one of them, you will have to choose which one to buy. Both products cost money and that is their financial cost.  There is also an opportunity cost – the possibility of buying and enjoying the use of the other item.  If you buy the iPod, the opportunity cost of the iPod is the shoes  If you buy the shoes, the opportunity cost of the shoes is the iPod  Here's another example: if a gardener decides to grow carrots, his or her opportunity cost is the alternative crop that might have been grown instead (potatoes, tomatoes, pumpkins, etc.) 37
  • + Business activity and the factors of production  Business activity involves the use of resources known as factors of production. These are:  Land  Labour  Capital  Enterprise 38
  • + Factors of production: land  Land includes all resources that occur naturally.  Can you think of any? 39
  • + Factors of production: labour  Labour is the effort of work provided by people.  Labour-intensive production can often be found in many developing countries. Labour-intensive production means labour is plentiful and relatively cheap compared with the technology available to do the job.  In more industrialised countries such as the UK labourintensive production can be more expensive in terms of wages than the cost of running machinery. 40
  • + Factors of production: capital  Capital includes items used in the production of goods and services made by people. These include:  Buildings  Machinery  Equipment  Finance required to purchase these items  Production that uses a high proportion of capital compared to labour is called capital-intensive. Capital-intensive production can be seen as a cheaper and more efficient production using the latest technology than by hand (labour-intensive) 41
  • + Factors of production: enterprise  Enterprise is the ability, skill and enthusiasm to take risks involved in developing a business idea and gathering appropriate resources.  All businesses combine factors of production to produce goods and services that people want to buy.  A large company like Kuwait Petroleum Corporation will use all four elements to produce the final product (petrol or diesel). 1. Land- oil wells and refineries 2. Labour- staff 3. Capital- drilling equipment, pipelines, office buildings 4. Enterprise- the skill of senior management 42
  • + 43 Village fisherman  Land: Labour:    Capital: Enterprise:
  • + Adding Value  Added value = the difference between the price of the finished product/service and the cost of the inputs involved in making it.  This is because of the work carried out increases the value of the parts and raw materials used. When the product is complete its value and the price it is sold at is more than the value of the factors of production used to make the product.  So added value is the increase in value that a business creates by undertaking the production process.  It is quite easy to think of some examples of how a production process can add value. Consider the examples of new cars rolling down the production line being assembled by robots.  The final, completed and shiny new car that comes off the production line has a value (price) that is more than the cost of the sum of 44
  • + Activity 1.4 1. Consider one of the following businesses:  a farm  a furniture maker  a shop  a cosmetics manufacturer  a paper producer  a producer of music CDs 45
  • + 46 Activity 1.4  Construct a table like the one shown below. Complete your table with examples of the types of resources or factors of production used by your selected business. The first line of the table has been completed as an illustration. Factors of production Business Farm Land Labour Land for Farm grazing workers animals or growing crops Capital Tractors Enterprise Skills and efforts of the farmer in setting up and running the farm
  • + Activity 1.4  Design a poster of diagram showing how, by combining these resources and transforming them into a finished product, the business adds value to the resources. 47
  • + Adding value  You don’t have to use robots or have the culinary skills of Gordon Ramsay to “add value”.  For example, businesses can add value by:  Building a brand – a reputation for quality, value etc that customers are prepared to pay for.  Nike trainers sell for much more than Hi-tec, even though the production costs per pair are probably pretty similar!  Delivering excellent service  – high quality, attentive personal service can make the difference between achieving a high price or a medium one  Product features and benefits  – for example, additional functionality in different versions of software can enable a software seller to charge higher prices; different models of motor vehicles are designed to achieve the same effect.  Offering convenience  – customers will often pay a little more for a product that they can have straightaway, or which saves them time. 48
  • + Adding value 49 Why would people pay a bit more money for a loaf of bread than make it at home?
  • + 50 Summary Supplying Supplying needs and needs and wants wants Demand Demand Effective Effective demand demand Scarcity Scarcity Goods and Goods and services services What is What is business? business? Adding value Adding value Selling price Selling price minus cost minus cost Opportunity Opportunity cost cost Land Land Resources Resources Factors of Factors of production production Labour Labour Capital Capital Enterprise Enterprise
  • + Summary 1. We all have needs and wants. 2. The main purpose of business activity is to supply the goods and services people want. 3. The objective of most private sector businesses is making a profit. 4. The main objective of public enterprise is to provide services to the local and national community. 5. The main objective of non-profit-making organisations is to meet a perceived social need or to provide help to a specific section of the community that is not met by private or public enterprise 6. Businesses produce goods and services using scarce resources known as factors of production: land, labour, capital, enterprise. 7. Value is added to the resources because of the work carried out to produce the finished product has a value that increases the value of the parts and raw materials used. 51
  • +Key terms  Added value – the difference between the selling price of a product and the cost of raw materials used to make it  Effective demand – demand for a product that is backed up by the ability and willingness to pay for it  Factors of production – the four categories of resources that are used to produce goods and services: land, labour, capital, enterprise  Goods- tangible products that can be touched and consumed  Needs – things necessary to sustain life  Opportunity cost – the cost of something in terms of the next best thing  Private sector – the sector of business consisting of businesses owned by private individuals or groups 52
  • 53  Profit – the profit a business makes is the amount by which its income from selling the goods and services it produces exceeds the costs of producing those goods and services  Public sector – the sector of business consisting of businesses owned by the state  Resources – items of limited availability that can be used in human activity  Services – things other people or businesses do for you  Wants – things chosen to satisfy a need or to make life more enjoyable
  • + Factors of production Match each factor of production to the correct description and example (cards). Exemplar question: What is meant by the term ‘added value’? (2) 54