1.1.

1 The nature of business activity

Sit Dolor Amet

Economic
Problem
UNLIMITED NEEDS LIMITED OPPORTUNITY
AND WANTS RESOURCES COST
Because of Unlimited needs and wants and limited resources
we have make a choice. 
This next best alternative foregone while making a choice is
known as Opportunity Cost.
Limited Resources
Land: All natural resources provided by nature such as fields,
forests, oil, gas, metals and other mineral resources

Labour: The people who are used produce goods and services.

Capital: Finance, machinery and equipments needed to produce

goods and services.

Enterprise: The skill and risk taking ability to bring together all

the other factors of production to produce goods and services.
Usually the owner or founder of a business.
What does
business do?  Business activity combines the factors of production to
produce goods and services to satisfy our needs and wants.
  Added value is the difference between the cost of acquiring the
raw materials and finished goods.
 Value added = Sales Revenue - cost of Raw materials
 For example, if I am selling wooden chair. 
Cost of wood for one chair=$100
Selling Price of one chair=$250

Added Value= Selling price-Cost of raw material
Value Added i.e. ($250-$100)
=$150
Value added is NOT the same as Profit.

For profit we subtract the cost of raw material + labour cost +

other expenses from sales revenue
whereas in Valued added we subtract the raw material cost
only.
 For example, ‘value added for airlines company’
Business which by providing better, more comfortable seats, more leg room, better
trained in-flight attendants etc.
adds more value  Ways of adding value
to their  Creating a brand: Brands represent quality and sometimes status
products and (Nike; Puma)
services can  Advertising:business can create a strong brand loyalty among its
customers 
charge more to  Providing customised services: business providing better quality
their customers personalised services to their consumers add more value.
and eventually Consumers are willing to pay a little extra for customised services
(restaurant)
lead to higher  Providing additional features: additional features or
revenue. functionality can make the consumers pay extra.(eg car; mobile
phone)
 By offering convenience: consumers love convenience. For
example, free home delivery of your weekly grocery.
 i

Benefits to a  t can charge more to its customers. This leads to more

profitability for the business I
business of  A business can differentiate itself from its competitors.
adding value  adding value helps cost cutting in the long run no need for
advertising and other promotional activities once it has created a
perception of high quality and brand loyalty among its customers.

the dynamic
business
environment
why
businesses
succeed or fail
differences
between local,
national,
international
and
multinational
businesses