Unit 1 – Business and its

Environment
Chapter 1 - Enterprise
Introduction to business studies
During this course you will learn:
How business decisions are made
Information needed to make the decisions
Techniques to help managers make
decisions
The environment in which the business
operates
Limits that govt put on businesses
Purpose of business activity
What is the definition of a business?
An organisation that uses resources to
meet the needs and wants of customers by
providing a good or a service that they
demand
What do businesses do?

Produce the
Purchase goods or
ID needs of resources or services with
customers Factors of the aim of
Production making a
profit
Types of goods and services
Consumer goods:
durable or non-durable

Consumer services:
non-tangible

Capital goods: help

produce other goods
What do businesses need?
• Site for buildings suppliers
• Raw materials Land
• coal, oil, timber

• Finance
• Factories/offices
Capital
• Capital goods eg: Machines,
computers

Govern
• Skilled/Unskilled ment
Labour
• Temp/permanent

• Risk Takers
• Decision Makers Enterprise
• Coordinators Customers
What is a key objective of any business?
Adding Value

Definition: the difference between the

cost of purchasing raw materials and the
price the finished goods are sold for
VALUE ADDED IS NOT THE SAME
AS PROFIT
Example - a factory manufacturing
matches
Buy logs (tree trunks) for $1000
Logs are cut down into match sticks
1) Phosphorous ends will be added
Matches packed into boxes
Matches are sold to customers for $4000
Value added
If a business can increase value-added without
increasing costs then PROFIT will increase
Example:
How can a jeweller add value?
A sweet manufacturer?
A hotel?
A car dealer?
Clothing manufacturer?
Fast-food restaurant?
A juice-bar?
Economic Activity and the problem of
choice
Our world has great wealth and great
scarcity
Very poor cannot obtain basic requirements
– food, clean water, shelter
They have many unsatisfied needs and
wants
Even rich people have needs and wants –
56” flat screen TV, BMW, Jacuzzi
So there are insufficient goods to satisfy
all of our needs and wants at any one time
The purpose of economic activity to
provide for as many of our wants as
possible
Yes there is this shortage of products
leads us to needing to make choices
As we cannot satisfy ALL of our wants
then we must choose those which we will
satisfy now and those which we will
forego
If we are careful and rational then we will
choose the one that gives us the greatest
benefit
Everyone needs to make choices –
businesses, govt, workers, charities etc
Opportunity Cost
The benefit of the next most desired
option which is given up
Economic Activity and the problem of
choice

Unlimited Limited Choice must Opportunity

wants resources be made cost
The role of the entrepreneur
DEF: SOMEONE WHO TAKE THE
FINANCIAL RISK OF STARTING AND
MANAGING A NEW VENTURE
Entrepreneurs
1. Have an idea for a business
2. Invest their own savings and capital
3. Responsible for managing it
4. Have risk of failing
Characteristics of an Entrepreneur
Innovation
Commitment and self-motivation
Multi-skilled
Leadership skills
Self-confidence and ability to bounce
back
Risk-taking
Challenges facing entrepreneurs
1. Identifying successful business
opportunities
2. Sourcing capital (finance)
3. Determining a good location
4. Competition
5. Building a customer base
Read case study “Farah branches out on her
own” pg 10
Why do new businesses fail?
Lack of record keeping
Lack of working capital
Poor management skills
Changes in the business environment
Sectors of the Economy
• Fishing
Primary
Sector
• Farming
• Mining

Secondary • Manufacturing
Sector • building

• hairdressing
• Car repairs
Tertiary
Sector • Restaurants
• banking/
insurance
Impact of enterprise on the economy -
In other words why do govt support new start-
ups?
Job creation
Economic growth
Firm’s grow into large firms
Innovation and tech 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 maximising
returns to owners
This is NOT a charity – these businesses
run a normal business but they can keep
some profit for themselves but re-invest
their surplus profits in socially responsible
ways.
Aims of a Social Enterprise (THE
TRIPLE BOTTOM LINE)
3 main aims (PROFIT NOT THE SOLE
OBJECTIVE)
1. Economic – make a profit to reinvest
back into the business and provide some
returns to owners
2. Social – provide jobs for local
communities – often disadvantaged ones
3. Environmental – to protect the enviro
and manage the business sustainably