Unit 1.2 Why do businesses exist?

Enterprise Profit Charity Public Service

Enterprise A person who has enterprise is one who has the skill to develop an idea for a new business or product and takes risks to turn the idea into a success. This is where we get the term entrepreneur. F Examples of famous entrepreneurs are: Bill Gates (Microsoft) Richard Branson (Virgin) Anita Roddick (Body Shop)

Profit In business, profit is  difference between the cost of providing goods and services to customers and the amount the customers pay for them. A business has to make a profit so that its owners are encouraged to continue is business and remain efficient. F

Charity A charity is formed to raise the awareness of the general public about the plight of needy people and to raise funds for worthy causes. F

Public Service Public Services provide the same quality of service to everyone in a country F Hospitals Schools Local Government Police Defence (Army)

Aims of Business Private Sector – Profits Public Sector – Provide Services Voluntary Sector – Charitable, non profit-making G

Aims of Business To maximise profits To turn gaps in the market/innovative ideas into successful a business enterprise Continuing to meet customers’ needs and wants through adapting existing products/services To expand and benefit from growth G Private Sector

Aims of Business To provide the same quality of service to everyone, eg the same hospital service throughout the UK G Public Sector To provide a service which is essential to everyone

Aims of Business Charity To raise awareness of worthy causes To receive funds to help worthy causes, fund- raising events, eg Comic Relief Provide information on how the funds have been spent G Voluntary Sector Non profit-making organisation To provide the best service and facilities for its members

Stakeholders Stakeholders are people who have an interest in a business. Who are the stakeholders in a school? G

Stakeholders G Private Sector  owners, managers, employees, customers Public Sector  government, MPs, patients, employees Voluntary Sector  donators, trustees, volunteers

Shareholders Shareholders are people who have a financial investment in a company. In return for investing their money, they receive a certificate of shares, hence the term shareholder. G

Risk Taking They use their own and other people’s money to support a business venture. Failure may bring bad publicity Borrowing may be limited and costs not covered Sales may be affected by poor market research for a new product or service C In Slide 3, entrepreneurs were described as “Risk takers”. Why?

Risk Taking Satisfaction. Own boss – make all the decisons Earn profit Pursue a hobby C SO: Why do entrepreneurs take these risks?

Social Costs and Benefits Social Costs Traffic congestion Traffic pollution – poor air quality Noise pollution Health problems These are negative effects on a community as a result of a new business. C

Social Costs and Benefits Social Benefits Improved road network New housing New schools These are positive effects on a community as a result of a new business C

Economic Costs and Benefits Economic Costs Money spent on premises, roads for new business rather than other things (opportunity cost) Increase in council taxation, eg Rates Council tax Water rates These are negative money effects on a community as a result of a new business C

Economic Costs and Benefits Economic Benefits C More jobs – more people employed More money available to spend in local shops Business growth Improved standard of living These are positive money effects on a community as a result of a new business