Topic 1 of 6 · Form 3
Understanding business activity
Businesses combine factors of production to produce goods and services that satisfy needs and wants; added value; specialisation; the economic problem and opportunity cost.
Notes for this topic 1 file, in order
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Purpose and nature of business
Businesses combine factors of production to produce goods and services that satisfy needs and wants; added value; specialisation; the economic problem and opportunity cost.
Classification
Primary, secondary and tertiary sectors; public and private sectors; changes in the importance of sectors as countries develop.
Enterprise and growth
Characteristics of entrepreneurs; business plans; government support for start-ups; measuring size (employees, output, capital employed, market share); internal and external growth (mergers and takeovers – horizontal, vertical, conglomerate); why some businesses stay small; reasons for business failure.
Types of business organisation
Sole traders, partnerships, private and public limited companies, franchises, joint ventures and public corporations – ownership, control, liability and finance.
Objectives and stakeholders
Survival, growth, profit, market share, social enterprise objectives; stakeholder groups and their conflicting aims.
Check yourself
- What is added value?
- Give one advantage and one disadvantage of a franchise for the franchisee.
- Name two stakeholder groups that might have conflicting objectives.
Show answers
- The difference between the selling price and the cost of bought-in materials.
- Advantage: established brand and support; disadvantage: fees/royalties and limited independence.
- e.g. shareholders (higher profits) and employees (higher wages).
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