Nature of Business Essay

674 Words Apr 10th, 2013 3 Pages
1.1 – Nature of Business Activity

A business is a decision-making organisation which uses a combination of inputs, processes and outputs.

Inputs ideas, money, labour, employees, raw materials, equipment

Processes action of turning inputs into outputs cooking, delivery, manufacturing Outputs final products goods or services

Businesses exist to satisfy the needs and wants of people, organisations and governments.

Small Businesses – have the same people fulfilling multiple roles Large Businesses – Many specialists in each department

There are a number of types of products that a business can offer:  Consumer goods o Durable goods that are kept for a number of years o Non-durable goods that are only kept in the short term
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Profit is important to a business for:      Incentive to produce Reward for taking risks Encourages invention and innovation Indicates growth or decline Source of finance


Profit is calculated by:

Factors of Production
Land This is a natural resource, and can be classified as renewable and non-renewable. It can be used for office buildings, mining, farming, etc. Labour This is the physical and mental effort that goes into the production of a good or service, performed by employees. Capital This is resources that are used to create and produce products. This includes money, buildings, equipment, tools, machinery and vehicles Enterprise or Entrepreneurship This is the management, organisation and planning of these three factors

This is when the business concentrates on the production of a particular good or service, or a small range of similar products. Individual – A person specialising in a profession Departmental – Departments focus on a specific function Corporate – The firm specialise in the provision of a limited range of products Regional – When a particular region specialises in an area National – A whole country may specialise in a particular area


Advantages Increased productivity Higher profit margins Increased efficiency Standardisation

Disadvantages Boredom Inflexibility Lack of autonomy High capital costs


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