GCSE Business Studies/Business Ideas

Business Aims

A business gets started when somebody decides that they can earn a profit by making goods or providing a service and selling it to people who are willing to pay for it. All businesses have the same main objective: to make a profit. A business must make a profit in order to survive. If not, it will go bankrupt and have to close down.

Businesses may have other secondary objectives they also wish to achieve, such as:

To be the largest in their market.
Provide the highest quality product possible.
Expand the business organizations to a good position.
Maintain a high market share in the market .
Maintain a high customer satisfaction level.
Limit environmental damage they cause.

The Economy

An economy has two sectors:

The Public Sector

The public sector includes everything that is owned by government.
It includes things like the army, the police, and most schools and hospitals.
Public sector businesses do not exist to make a profit. They exist for the benefit of everyone.

The Private Sector

The private sector includes everything that is owned by private individuals.
Most businesses are in the private sector.
Private sector businesses exist to make a profit. They are run for the benefit of the people who own them.

Needs and Wants

Businesses make a profit by providing things that people need and want.
There is a difference between a need and a want. A need is something essential to survive. A want is something which we would like but do not need to survive.
Humans have five basic needs: food, water, shelter, warmth, and clothing.
Needs are only limited. Once we have these, we can think about other things we want. Wants are unlimited - we all have different ones, and we tend to want bigger and better things.
ex of needs: luxury house/ sanitary items.
Products are launched to fulfill the needs and wants of the consumers in the business's target market.

Opportunity Cost

The world's resources are divided into four groups:
- Land - natural resources.
- Labour - people.
- Capital - equipment.
- Enterprise - business owners and entrepreneurs.
There aren't enough resources to meet all of our needs and wants. (This is termed scarcity.)
This leads to an opportunity cost.
Consumers and businesses have to make choices when they buy things, because they do not have enough money to buy everything they want.
The opportunity cost is the cost of rejecting the alternatives when making a selection. For example, if you only have enough money to buy a video game or a CD, the opportunity cost of choosing the game is the CD. By buying the game, you give up the opportunity to buy the CD.
Every business decision has an opportunity cost. There is a risk that the decision will be poor and the business will make a loss. Any profit is the owner's reward for taking that risk.

Goods and Services

In most cases, businesses will either produce goods or provide a service.
Goods and services can both be bought; however, goods are tangible (physical objects), and services are intangible (non-physical).
Goods and services can be put into two groups:
- Consumer goods and services are intended for the use of the ordinary public, e.g. televisions, hairdressers.
- Producer goods and services are intended for the use of other businesses, e.g. machinery, advertising companies.
In addition, there are two types of goods:
- Durable goods can be used over and over again, e.g. fridges, trousers.
- Single use goods can only be used once, e.g. a chocolate bar, a bottle of milk.