The Nature of Business Module 1: Chapter 1.1. What is a Business?
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Transcript of The Nature of Business Module 1: Chapter 1.1. What is a Business?
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The Nature of BusinessModule 1: Chapter 1.1
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What is a Business?
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Business Activity cont’d
Inputs
• 4 factors of production
Processes
• 4 functional areas of business
Output
• either a good or service.
Goods Services
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Purpose of a Business
Needs
Wants
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Business Activity
CUSTOMER VS CONSUMER
Value Added
Marketplace
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Opportunity Cost
It wasn’t until the mid 1990s that supermarkets went against government advice and began to trade on Sundays. Supermarkets in the UK realized the opportunity cost of being closed on Sundays. They were fined for such actions, as licensing to trade on Sundays had not been enacted, but the fines were so insignificant compared to the revenues that they were earning by opening on Sundays that the supermarkets continued with this practice. McDonald’s Corporation have followed by opening some 24-hours stores around the world. Banks in Hong Kong are currently contemplating opening on Sundays.a) Define the term opportunity costb) Use the case study to examine the reasons
why opportunity cost is an important concept in business decision-making.
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Opportunity Cost
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Factors of Production
Land
Labor
Capital
Enterprise
Inputs (resources) necessary for the
production process
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Returns for Factor Inputs
Factors of Production
LAND ENTERPRISECAPITALLABOR
RENT PROFITINTERESTWAGES
INCOME
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Specialization
SPECIALIZATION
• a concentration on the production of a particular output or a small range of similar products
DIVISION OF LABOR
• Specialization of workers in the provision of outputs
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Adv. & Disadv.
productivityefficiency
StandardizationHigher profit
margins
BoredomInflexibility
Lack of autonomy
Capital costs
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Functions of Business
Production
converting raw materials into finished goods
coordinated and monitored by the production manager
Quality Control
Finance
Managing the organization’s money
Finance manager
Informs those interested in the financial position of the business
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Functions of Business
Human Resources
Responsible for managing the personnel of the organization
Likely to deal with:• Workforce planning• Recruitment• Training• Appraisal• Pay and benefits• Equal opportunities• Health and safety matters• Fostering working relations
Marketing
Responsible for identifying and satisfying consumer wants and needs
Four P’s of marketing:• Product• Price• Promotion• Place
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Primary
Secondary
Tertiary
Sectors of the Economy
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Chain of Production
Primary Productio
n
Manufacturi
ng
Tertiary
Production
Consumer