1 .1 Enterprise

BUSINESS STUDIES

UNIT 1.1ENTERPRISE

1.1 Enterprise 1Cambridge A Level

Cambridge A-LevelBUSINESS STUDIES (1 ½ years)• Unit 1: Business and its

environment• Unit 2: People in organisations• Unit 3: Marketing• Unit 4: Operations and project

management• Unit 5: Finance and accounting• Unit 6: Strategic management


Unit 1: Business and Its Environment

• This unit is concerned with understanding the purpose and nature (objectives/structure/size and stakeholders) of business activity and the factors (‘environment’) that influence and constrain business behaviour and decisions.

• It also provides :– the basic framework around which the other sections

are developed.– a means for integrating business activities, which

should always be seen as a whole rather than as individual parts.

– An idea that the world is changing and to be successful businesses must adapt and respond to these changes.


Unit 1: Business and Its Environment

• 1.1 Enterprise• 1.2 Business structure • 1.3 Size of business• 1.4 Business objectives• 1.5 Stakeholders in a

business• 1.6 External influences on

business activity1.1 Enterprise 4Cambridge A Level

1.1. Enterprise• Scope

– 1.1.1 Nature of business activity •Business’ purposes; business concepts (“add value”

& economics); success factors; why businesses failed.

– 1.1.2 Role of entreprenuers•Quality & role of entrepreneurs

– 1.1.3 Social enterprise•Aims (triple bottom line)


1.1.1 NATURE OF BUSINESS ACTIVITY

Unit 1.1: Enterprise


Purpose of Business Activity

• A business is any organisation that uses resources that meet the needs of customers profitably by providing a product or service they demand. (p. 4)– Profit is the difference between what it costs to make and sell a product and what customer pays for it.


What Businesses NeedBusinesses need: (p. 5)

– Factors of production:•Land (site for building, raw materials)•Labor (skilled, unskilled, temporary, permanent)

•Capital (finance, factories/office, machines)•Enterprise (risk takers, decision makers, coordinators)

– Stakeholders (p. 71)•Suppliers•Government (Roads/rail/airports, law and order, schools/colleges)

•Customers1.1 Enterprise 8Cambridge A Level

What Businesses Need•


Factors of ProductionThe resources needed include:

– Land: land and resources (renewable & non-renewable) of nature; e.g. coal, crude oil and timber.

– Labor: manual and skilled labor.– Capital: finance (to set up a business and to pay for its continuing operations) and man-made resources (computer, machines, factories, offices and vehicles).

– Enterprise: risk takers (combining factors of production into a unit capable of producing goods and services), decision-makers & coordinators.


Business Concept 1: “Add Value”

• Added value is the difference between the cost of purchasing raw materials and the price the finished goods are sold for. (p. 6)

• A business adds value to the raw materials it uses to produce the good or service it sells.– Jewellers: well-designed shop-window display, attractive shop fittings, well-dressed and knowledgeable shop assistants and beautiful boxes.

– Sweet Manufacturer: Advertising, packaging, selling through established confectionery shops.


Business Concept 1: “Add Value”

•


Business Concept 2: Economics

• Economics is the study of how a society uses its scarce resources to produce and distribute goods and services. (Bovée & Ors. P. 6)– “Scarce” means limited; it means all of us (people, state, country, the whole world) have limited resources.

– But all of us have unlimited wants.


Business Concept 2: Economics• Because of unlimited wants and limited resources, all of us have to make choices – what goods or services to purchase or own.

• Making choices means giving up some other goods or services.

• The value (usually monetary or time) of those goods given up is called the opportunity cost in economics.

• Note: Opportunity cost may be defined as the benefit of the next most desired option which is given up. (p. 14)


Why New Businesses FailWhy New Businesses often Fail (p.

9)1. Poor planning2. Lack of working capital3. Poor management skills4. Inaccurate records5. Changes in the external

environment


Business Environment• The environment comprises factors (outside and inside) that might affect the ability of a firm to attain its goals.

• It may be external or internal.


Business Environment• Why Analyse the Environment?

– For SWOT analysis. – Strengths (S) and Weaknesses (W) – from internal environment al analysis.

– Opportunities (O) and Threats (T) – from external environmental analysis.


1.1.2 ROLE OF THE ENTREPRENEUR

Unit 1.1: Enterprise


EntrepreneurshipCharacteristics of Successful Entrepreneurs (p. 7)1. Innovative2. Committed and self-motivated3. Multi-skilled4. Leadership Skill5. Self-confidence and able to ‘bounce

back’6. Risk taker


EntrepreneurshipRole of Business Enterprises (p. 11)• Economy1. Create jobs2. Contribute to economic growth3. Generate export earnings4. Drive innovation and technological

change• Others5. Increase social cohesion6. Firm’s survival and growth7. Personal development


1.1.3 SOCIAL ENTERPRISEUnit 1.1: Enterprise


Social Enterprise• A social enterprise is a business with mainly social objectives that reinvests most of its profits into benefitting society rather than maximising returns to owners. (p. 12)

• Common Features of Social Enterprises– Produce goods or provide services directly– Have social aims and use ethical ways of achieving them

– Need to make a surplus or profit to survive (instead of relying on donations)


Social Enterprise• The 3 main objectives of a social enterprise are often referred to as the triple bottom line. (p. 12)– Economic – make a profit to reinvest back into the business and provide some return to owners.

– Social – provide jobs or support for local, often disadvantaged, communities.

– Environmental – to protect the environment and to manage the business in an environmentally sustainable way.


1 .1 Enterprise

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