Business & It’s Environment Ch. 1 - Enterprise Unit 1 Business & It’s Environment EQ: What is the nature of business activity and the role of enterprise in setting up and developing businesses?

Chapter Objectives You will be able to: Understand what business activity involves Analyze the meaning & importance of value added Recognize the key characteristics of successful entrepreneurs Assess the importance of enterprise and entrepreneurs to a country’s economy Understand the meaning of social enterprise and the difference between this and other businesses

Purpose of Business Activity Provide a product or service Add value to resources to make them more desirable W/O business we are limited to what we can make/grow ourselves Purpose of Business Activity A business is any organization that uses resources to meet the needs of customers

Business Activity uses… Scarce Resources To Produce Desirable Goods & Services

Purpose of Business Activity Identify the needs of customers Purchase resources Using factors of production Produce goods & services Satisfy needs while making $$$$ Purpose of Business Activity What do businesses do?

Key Definitions Consumer goods (items that can only be used once) physical and tangible goods sold to the public –includes durable consumer goods, (cars, houses and household appliances), and non-durable consumer goods (clothing, food, drinks, and candies) Consumer services (emotional items/services) The non-tangible products sold to the public (hotel accommodations, insurance and travel services) Capital goods (items used in production) Physical goods used by industry to aid in the production of other goods and services (machines and commercial vehicles)

Purpose of Business Activity Identify the needs of customers Purchase resources (factors of production) Produce goods & services Satisfy needs while making $$$ Purpose of Business Activity What do businesses need to produce goods and services?

Factors of Production (p.4) Resources needed by business to produce goods or services Land Labor Capital Enterprise

Added Value The difference between the cost of purchasing raw materials and the price the finished goods are sold for Cost of inputs/materials Production process adds value Value of output of finished goods, includes the services, and ‘extras’ added during production

Role of the entrepreneur (p.7) Entrepreneur – someone who takes the financial risk of starting and managing a new venture Characteristics of successful entrepreneurs Innovation Commitment and self-motivation Multi-skilled Leadership skills Self-confidence and an ability to “bounce back” Risk taking

Challenges faced by entrepreneurs Identifying successful business opportunities Sourcing capital (finance) Lack of sufficient own finance Lack of awareness of financial support & grants available Lack of any trading record to present to banks as evidence of past success Poorly produced business plan that fails to convince potential investors Determining a location Competition Building a customer base

Why do new businesses often fail? Lack of record keeping Lack of working capital Poor management skills Changes in the business environment

3 Types of businesses Primary sector - Extract natural resources Farming , fishing, oil drilling Secondary Sector - Manufacture and process products made from natural resources Computers, clothes making, construction Tertiary sector – provides services people need Hairdressing, car repair, daycare, restaurants

Impact of Enterprise on a country's economy Employment creation Economic growth Firms’ survival and growth Innovation and technological change Exports Personal development Increased social cohesion

Social Enterprise A business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximizing returns to owners Makes money in socially responsible ways Uses most of it’s profits to benefit society ARE NOT A CHARITY!

Social Enterprise Common features: They directly produce goods or provide services They have social aims and use ethical ways of achieving them They need to make a profit to survive as the do not rely on donations

Social Enterprise 3 Objectives Economic – make a profit to reinvest back into the business and give a return to owners Social – provide jobs or support for local, often disadvantaged, communities Environmental – to protect the environment and to manage the business in an environmentally sustainable way Triple Bottom Line

Economic Activity & Choice Consumers have to choose what to buy Opportunity cost – the benefit of the next most desired option which is given up OR With limited resources, if consumers choose the iPod, then the Jordan's become the opportunity cost.