ch. 1 - enterprise eq: what is the nature of business activity and the role of enterprise in setting...
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Ch. 1 - EnterpriseEQ: What is the nature of business activity and
the role of enterprise in setting up and developing businesses?
Unit 1
Business & It’s
Environment
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Chapter Objectives
You will be able to:Understand what business activity involvesAnalyze the meaning & importance of value addedRecognize the key characteristics of successful
entrepreneursAssess the importance of enterprise and entrepreneurs
to a country’s economyUnderstand the meaning of social enterprise and the
difference between this and other businesses
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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
A business is any organization that uses
resources to meet the needs of customers
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Business Activity uses…Scarce Resources
To Produce
Desirable Goods & Services
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Purpose of Business Activity
0 Identify the needs of customers0Purchase resources • Using factors of production
• Produce goods & services• Satisfy needs while making $$$$
What do businesses do?
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Key Definitions
0 Consumer goods (items that can only be used once)physical and tangible goods sold to the public –includes
durable consumer goods, (cars, houses and household appliances), and non-durable consumer goods (clothing, food, drinks, and candies)
0 Consumer services (emotional items/services)The non-tangible products sold to the public (hotel
accommodations, insurance and travel services)0 Capital goods (items used in production)
Physical goods used by industry to aid in the production of other goods and services (machines and commercial vehicles)
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Purpose of Business Activity
1. Identify the needs of customers2. Purchase resources (factors of
production)
3. Produce goods & services
4. Satisfy needs while making $$$
What do businesses need to produce goods and
services?
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Factors of Production (p.4)
Resources needed by business to produce goods or services
Land
EnterpriseCapital
Labor
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Added ValueThe difference between the cost of purchasing raw
materials and the price the finished goods are sold for
Cost of inputs/materials
Value of output of finished goods,
includes the services, and ‘extras’ added
during production
Production process adds value
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Role of the entrepreneur (p.7)
Entrepreneur – someone who takes the financial risk of starting and managing a new venture
Characteristics of successful entrepreneurs0 Innovation0 Commitment and self-motivation0 Multi-skilled0 Leadership skills0 Self-confidence and an ability to “bounce back”0 Risk taking
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Challenges faced by entrepreneurs
0 Identifying successful business opportunities0 Sourcing capital (finance)
0 Lack of sufficient own finance0 Lack of awareness of financial support & grants available0 Lack of any trading record to present to banks as evidence of
past success0 Poorly produced business plan that fails to convince potential
investors0 Determining a location0 Competition0 Building a customer base
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Why do new businesses often fail?
0Lack of record keeping
0Lack of working capital
0Poor management skills
0Changes in the business environment
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3 Types of businesses
0Primary sector - Extract natural resources• Farming , fishing, oil drilling
0Secondary Sector - Manufacture and process products made from natural resources
• Computers, clothes making, construction
0Tertiary sector – provides services people need• Hairdressing, car repair, daycare, restaurants
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Impact of Enterprise on a country's economy
0Employment creation0Economic growth0Firms’ survival and growth0 Innovation and technological change0Exports0Personal development0 Increased social cohesion
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Social Enterprise
A business with mainly social objectives that reinvests most of its profits into benefiting society rather than
maximizing returns to owners
0Makes money in socially responsible ways0Uses most of it’s profits to benefit society0ARE NOT A CHARITY!
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Social Enterprise
Common features:0They directly produce goods or provide services0They have social aims and use ethical ways of
achieving them0They need to make a profit to survive as the do not
rely on donations
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Social Enterprise 3 Objectives
0 Economic – make a profit to reinvest back into the business and give a return to owners
0 Social – provide jobs or support for local, often disadvantaged, communities
0 Environmental – to protect the environment and to manage the business in an environmentally sustainable way
Triple Bottom
Line
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Economic Activity & Choice
0Consumers have to choose what to buy
0Opportunity 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.