Business Revision Notes: 1AS.

Enterprise

What is enterprise?

 Willingness to undertake new ventures, initiative

 Creativity to come up with new ideas and ways of doing things
 Evaluate whether something is worth doing even with risks involved
 To take advantages of new changes – methods, processes, demands in thing people want.
 Willing to try and to learn from the mistakes
 Braveness, daring, committed and motivated

The Nature of Business activity

Purpose of Business Activity

- A business is any organization that uses resources to meet the needs of customers by
providing a product of service that they demand
- Business activity at all stages involves adding value to resources, such as raw materials
and semi-finished goods, making them more desirable – to – the final purchaser of them
- Without business, we would still be entirely dependent on the goods that we could make
or grow ourselves
- They do this by sourcing scare resources such as raw materials [ inputs ] and turning
them into finished goods or services [outputs]
The Concept of Adding Value

A business adds value to the raw materials it uses to produce the good or service it sells. Added value
is one of the key objectives of any business. If a customer is prepared to pay a price that is much
greater than the cost of materials used in making or providing a good or service, then the business
has been successful in ‘adding value’ .

Key Definition
Added valye the difference between the cost of purchasing raw materials and th price the finished
goods are sold for

The concept of valued added can be illustrated by an example taken from the building industry.

The Nature of economic activity and the problem of choice

- We live in a world of great wealth and great scarcity (shortage)
 - We have limited resources but unlimited wants, needs
- Poor people are unable to find the basic requirement for life yet rich people may not be
satisfy all of their wants for luxury goods and services
[Inequalities – rich and poor]
- It is the purpose of economic activity to provide for as many of our wants as possible ,
however with the shortage of products and limited resources it lead us all having to make
choices

Opportunity cost

- In deciding to purchase one item, we must give another. This cost of giving up one
thing for another is referred to as “opportunity cost”
- The benefit of the next most desired option which is given up
Business environment is dynamic
- Business and the environment are inter-connected
- Risk of new change can make the original business idea much less successful such as
:
 New competitors
 Legal changes [outlawing the product ]
 Economic changes leave customers with much less money to spend
 Technological changes

Businesses
experience a
experience a
slow down
slow down

Customers
If the
leave with
leave with
much less
economy People have
People have
money to buy
spend
is not no confidence
spend
strong

People don't
invest as
much
much

What a business need to succeed

 Factors of production

The difference in purchasing cost and

selling price is called “value added”
 Inputs Outputs

 Enterprise
 Finished goods
 Land
 Services
 Capital
Production Process
 Component for
 Labor
other firms

Aim is to add value and sell for a profit.

Value Added DOES NOT equal profit.
Why many business fail early on

Construct a cash flow forecast

Record delivery dates Inject sufficent amount of funds to
Payment dates last couple amount of mothns
Recieved payments Good relationship with banks
Tax calculations Effective credit control

Lack of
Lack of record
working
keeping
capital

Leadership skills Poor Changes in

Cash management and management businessNew competitors
coordinating skills environment
Legal changes
Communication skills Economic changes
Marketing, promotion Techcological changes

The Role of the entrepreneur

Qualities an entrepreneur is likely to need for success

 Innovation and creativity  Leadership skills

 Multi-skilled  Ability to manage finance
 Self-motivated  Decision-making
 Ability to bounce back from  Vision
the worst situation  Commitment
 Passion  Consistency
 Confidence  Courage
 Independence  Stability
 Risk-taking  Charismatic
 The role of business enterprise in the development of a business and a
country

Impact Explanation

Setting up new business will create job for themselves

(entrepreneur) and others member in their family or friends.
Employment Creation In creating such employment, the national level of
unemployment will fall; release stress to the economy

Any increase in output of goods or service increase GDP (gross

domestic product) of the country. Increasing the living
standard for the population; increased output and
Economic Growth
consumption will also lead to increase tax revenues for the
government

A high portion of new firm fail, some survive and a few expand
largely. These firm employ large numbers of workers;
Firms Survival and growth
economically growth.

New business acquires innovation, creativity and this adds the

new dynamism to an economy. This business will grow due to
Innovation and technological less competition and make the nation’s business sector more
change competitive. The increased use of IT by firms can help the
nation become more advanced in new application, technology.

Business start-up by offer goods and services that meet the

needs of local or regional market. However, some will expand
their operations to the export market, noticing that other
Exports market may not have the same advantage in capital goods
therefore they could improve their value of nationals export
and international competiveness.

Setting up a successful business will develop useful skills,

experience and confidence for an individual to continue
Personal Development expand new firm and new sector of business. This can inspire,
lead others to follow their path.

Unemployment often leads to serious social problems

and it can be much reduced if there are jobs and career
opportunities for the community. Consequently,
Increased Social Cohesion
entrepreneurship can help to achieve social cohesion in
the country.

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Social Enterprise
- a business with social objectives that reinvest most of its profit into benefiting society
rather than maximizing returns to owners
- Social Enterprises compete with other businesses in the same market or industry.
- They directly product goods or provide services
- They have social aims and use ethical ways of achieving them
- They are not rely on donations as charities do.

Economic

Make a profit to reinvest back into the business and provide

some returns to the owner

Social

Provide jobs or support for local, often disadvantaged,

communities

Environment

To protect the environment and to manage the business in an

environmentally sustainable way.

The Triple Bottom Line