Business Studies Prelim Notes

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Business Studies notes…
Topic 1- Nature Of Business

The importance of businesses
The function of business in creating value/benefit
← A business is an organization that buys and sells goods, makes products or provides services. ← Business enterprises undertake many activities to provide the products demanded by customers, however, the most important activity is production. ← The management of the business, organizes all aspects of running the business including choosing a particular product or service

Production
← Refers to those activities undertaken by the business that combine the resources to create products that satisfy customer needs and wants. ← All products are made from a combination of the following three ingredients: ← National Resources (raw materials)

← Capital Resources (machinery and technology)
← Labour Resources (human skill and effort)

Adding Value through production
Value Chain- the concept that value is added through each stage of the production process, as inputs are transferred into final products (output)

Value is added during the production of a loaf of bread:
← The productive activity was:
← Production of wheat on farm
← Production of bread at bakery
← Production of delivery services by drivers
← The product (output) of one business becomes the raw material (input) by another business is referred to as intermediate products. ← Businesses are interdependent as one relies on another for further manufacturing of the product and after distribution. ← As the raw materials move along the various stages of production, extra value is created- a process known as value adding. ← The production process creates the value chain

← The value of production is the total value added by a producer, measured in dollar terms: ← Value of production=Value of sales-Value of intermediate products ← The value added to the product is the difference between the cost of the raw materials and the amount received from customers when the product is sold

The Social and Economic Roles of Businesses
← Create employment
← Provide the basis of the nation’s income- Business success has an effect across an entire society, increasing wealth and economic activity ← Bring about technological change and innovation Provides major competition for businesses. Competitors offer products which are better, cheaper or more convenient ← Provide opportunities fro individuals to become entrepreneurs- can achieve substantial success and build substantial wealth ← Offer choices relating to work and consumption- offers people a diverse sector which gives them the opportunity to specialise in what they do ← Provide social interaction- for dealing with people of all ages, for friendships and in some cases even marriage

Business Stakeholders
A stakeholder is any member of the community affected by the decisions and actions of a business. ← Employees- business decisions impact their health, safety, security, pay levels and general working conditions ← Management- Management in a firm is ultimately responsible for communicating business decisions to other stakeholders and because the career directions of managers will be influenced by public perceptions of the performance of the firm. ← Customers- become dependent on a business for the supply of particular goods and services . Changes in business conduct can influence customers sometimes causing great inconvenience such as the relocation of a business that sells key supplies for the community ← Suppliers- may make a decision to invest substantially in a new technology, business premise, inventory/training in order to provide services to a business with whom it may have a particularly important relationship. ← Local Communities- For an manufacturer, production may have adverse effects on the environment that are especially significant to local residents. ← Future Generations- The decisions of large global companies, such as oil producers, will...
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