The document discusses several key topics related to businesses and economics: 1. It outlines different types of economic systems including centrally planned, free market, and mixed systems. 2. It discusses stakeholders in businesses like customers, suppliers, owners, managers, employees, community, and government. 3. It explains that businesses aim to provide services, make profits, and have charitable purposes while balancing costs and benefits to the community.

1. Unit 1.2 Why Do Businesses Exist?

2. The purpose of business To provide a service To make a profit For charitable purposes To develop a good idea

3. What is this famous ship called? It boldly goes where no-one has gone before into the unknown It takes risks

4. What is Enterprise? Enterprise is the art of bringing together land, labour and capital – the factors of production The person who is responsible for bringing together the factors of production is called an entrepreneur

5. Entrepreneur Here is a famous entrepreneur What is he famous for? How did he start up his business?

6. Risk Taking Starting a new businesses involves risk. Why? Because it is a venture into the unknown Entrepreneurs take risks: To make bigger profits To increase market share To survive To grow

7. Aims of the business Different organisations have different aims and objectives. Remember the three business sectors? Private Public Voluntary

8. Private Sector Aims The Private sector aims are all Profit-related To survive To break-even To maximise profits To increase shareholder returns To expand and grow

9. Public Sector Aims The Public sector aims are Service-related To improve quality of service To cut costs/break-even To raise revenue

10. Voluntary Sector Aims Voluntary sector aims are all aid-related To help people To maximise cash collection To offer more community services To recruit more helpers To open more branches/shops

11. Having an Interest in a Business Southsiders is a new TV soap being made. It is expected to attract 15 million viewers. Who would benefit from this? They have a stake in the future success of the business!

12. Stakeholders Stakeholders are people with a key interest in a business The main ones in business are: Customers Government Community Owners Managers Employees Shareholders

13. 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?

14. Owners and Shareholders The number of owners and the roles they carry out differ according to the size of the firm In small businesses there may be only one owner (sole trader) or perhaps a small number of partners (partnership) In large firms there are often thousands of shareholders, who each own a small part of the business

15. organise make decisions plan control are accountable to the owner(s) Managers

16. Employees 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

17. 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

18. 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 Suppliers

19. Firms and the communities they exist in are also in a two-way relationship The local community may often provide many of the firm’s staff and customers 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 Community

20. 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 Government

21. Economic Systems What is the Economy? A system which tries to solve the Basic Economic Problem What is The Basic Economic Problem? How scarce resources with different uses are allocated to satisfy wants

22. Types of Economic System Centrally Planned System Free Market System Mixed System

23. Centrally Planned System All economic decisions made by government All firms & resources owned by Govt. Decisions taken by Govt. in interest of people Communist countries like former Soviet Union and the Eastern European nations used this. China and Cuba still do.

24. Free Market System Free market decisions about what is to be produced is made by the consumers and producers. The government does not intervene. This is what Adam Smith called ‘Laissez-faire’. Companies have to listen to customers in order to survive. If they don’t, they go bust! The United States is a free market system.

25. Mixed System A mixed economy combines elements of both systems. Some decisions are made by producers and consumers, while the government still make some decisions. The UK is a mixed economy. We have a large private sector and a large public sector too.

26. Infrastructure Infrastructure – road, rail, air links, sewage, telephone systems and utilities which provide a network that benefits both businesses and the community Building such systems require lots of capital , but can be seen as a good future investment

27. Balancing Costs and Benefits A new airport is to be built near Eaglesham. East Ren International Airport! Do you think the people who live in Eaglesham, Busby, Mearns would be happy? Think of some good points and bad points about this development

28. Key Terms Social Costs – bad or negative effects businesses have on the community Social Benefits - good or positive effects businesses have on the community Economic Costs – the cost of the business alternative given up Economic Benefits – the positive, long term changes to an area

29. Social costs and benefits Costs Air/noise/water pollution Traffic congestion Lifestyle change Local services unable to cope Benefits Happier customers Creation of jobs by business Contribution to local community Creation of jobs within other local businesses

30. Economic costs and benefits Costs Hospital v leisure centre Shopping centre v Football stadium Pub v Fast Food restaurant Packet of crisps v chocolate bar Benefits People employed Wages received Rise in standard of living Boost to local firms